I’ve written columns before about people who, in my opinion anyway, are trying way too hard to squeeze every last nickel out of their Social Security benefits. They’ve gone to one too many of these “Maximize Your Social Security” seminars that are all the rage today. And they’ve gotten their heads full of phrases like “file and suspend” and “restrict the scope of an application” and “delayed retirement credits” and “start stop start” and other strategies that apparently will land them all on Social Security’s Easy Street!
I’ve written many past columns about this phenomenon. But now I’ve run into someone who wants to squeeze one last tiny drop of blood out of her Social Security turnip. And it’s sure got me and her local Social Security officials scratching our heads. Here is an email I got from a reader with her story.
Q. I started taking my Social Security at 62. I will be 70 next month. My husband turned 66 this month. We have gone to several Social Security maximizing seminars and learned that my husband should restrict the scope of his retirement application and instead file for husband’s benefits on my record.
But at one of the seminars, a financial planner also advised me that I should suspend my benefits for this last month before I turn 70 and start them up again the following month. He said if I do this, I will get a bonus for the rest of my life. So we went to our Social Security office yesterday to do all this. They did let my husband file for benefits on my record. There was no problem with that. But when I asked about suspending my benefits for one month, they said I couldn’t do it. They told me because I took reduced benefits at 62, I could not suspend my benefits now. I checked back with the financial planner and he insisted I could. So who is right? My financial planner? Or the Social Security people?
A. Well, this is going to take a bit of explaining on my part. Your financial planner’s general recommendation is usually correct. But in this case, he’s wrong. And the Social Security people gave you the right answer, but for the wrong reason. So let me back up and go over your entire situation.
The primary Social Security maximizing strategy you and your husband are trying to employ is a common one. It is probably a good move on your husband’s part to take a 50 percent husband’s benefit on your Social Security account now and then save his own benefits until 70, when he would get a 32 percent delayed retirement bonus added to his Social Security checks.
I should note to readers who might be confused that the reason he can do this is the fact that he waited until age 66 to file for any Social Security benefits. Had he signed up for Social Security before age 66, the law would have required him to file for his own Social Security benefits. But by waiting until age 66, he is able to “restrict the scope of his application” to spousal benefits only.
This is one “maximizing” strategy that even I, someone who took his own Social Security benefits at age 62 and is skeptical of many of these schemes, can understand. But even in this situation, I would recommend that this woman’s husband sit down with a calculator and figure out all the benefits he will be giving up between 66 and 70 (the difference between his own full benefit and half of his wife’s much smaller benefit) just to get the bonus from age 70 on.
Now, let’s move on to your plan to suspend your benefits for one month in order to get a little bonus added to your post-age 70 benefits. First of all, it normally is possible. People who take benefits before age 66 can, if they want to, suspend those benefits at age 66, or any month after age 66, up until their 70th birthday month. For each month those benefits are in suspense, they will get a two-thirds of one percent bonus added to their post age 70 benefits.
So when the financial planner told you that you can do this, he was sort of right. And when the Social Security people told you that you can’t do it because you took benefits at 62, they were wrong.
What they should have told you is that you can NOT do it in this case because of a little quirk in the rules. Those rules say that you can request a suspension in your benefits for any month up to the month you are 70. But, the same rules say the request is effective with the month after the month it is received.
You said you turn 70 next month and that you went to the Social Security office this month to ask for the suspension. So your request could not be effective until next month, when you will already be 70, In other words, you’re one month too late.
Having given you that explanation, as confusing as it may have sounded, let me ask this question: Why in the world would you have wanted to do that in the first place? Why would you want to give up one full Social Security check just to get an extra two-thirds of one percent added to your future payments?
Here is a quick example. Let’s say your Social Security check is $1,000 per month. You would want to give up all that money for one month just so that from the following month onward, you would get about $1,006. Gosh, you’d have to live about 14 years before you would recoup that $1,000 loss you’d take.
And it’s not just the money issue, but all of the bureaucratic hassles involved. Because you would miss that one Social Security check, you would have to write the Social Security Administration a personal check for about $100 to cover the Medicare Part B premium that would have been deducted from the missing benefit. Also, I’m guessing there would have been a several month delay in stopping your benefits and starting them up again. Social Security computers are programmed to pay Social Security checks month after month. They are not set up to pay you benefits, then stop them for one month, and start them up again the next month.
Many so-called “maximizing” strategies are potentially good. But this one was just a little too crazy.
