I have written many columns cautioning people to not play around too much with their Social Security benefits by trying to squeeze every last nickel out of their nest egg.
And I know where the compulsion to do this comes from. Senior citizens are barraged with messages in the mail, in media and online, telling them that they are missing out on thousands of dollars in benefits if they don’t employ some kind of “maximizing” strategy. And then they are encouraged to attend seminars or buy books that supposedly will tell them the secrets to this hidden treasure trove of benefits.
Essentially, the “secret” message comes down to this: Wait as long as possible to file for your benefits. If you know you are going to live into your late 80s and beyond, that might be good advice. But of course, no one really knows how long he or she is going to live. Today’s questions come from people, or from spouses of people, who gambled on their longevity and, sadly, lost that bet.
Question: My husband waited until age 70 to file for his Social Security. He died two months ago. He was 71. Since he turned 66, I had been encouraging him to file for Social Security. He never listened. He said our financial planner told him to delay filing for benefits as long as possible. That’s what he did. And look what happened! Please tell your readers that it isn’t always worth it to try to get the highest benefit possible.
Answer: I’m so sorry to hear about your husband’s death. But thank you for sharing your message. In defense of financial planners, I will pass along this bit of advice from a good friend of mine who is one. He said his job is to help people plan for, and be financially prepared for, what possibly might happen — not for what probably will happen. And I guess it’s possible your husband might have lived a much longer life.
There is an upside to your husband delaying starting his Social Security benefits. Because he did that, you will get higher widow’s benefits. Assuming you are 66 or older and are not getting higher benefits on your own record, you will get his full benefit, including the 32 percent in delayed retirement credits he got for waiting until age 70.
Q: I just turned 68 years old. I was planning to wait until 70 to apply for my Social Security. However, I was recently diagnosed with stage 4 non-Hodgkin lymphoma. I probably have less than six months to live. I realize now I made a bad decision by not filing for my Social Security earlier. But what I want to know now is, what can I do to make sure my wife gets the highest widow’s benefit possible? Just so you know, my full retirement age benefit would have been $2,480.
A: I am so sorry to hear about your health prognosis. And it certainly is noble of you to be thinking about your wife at a time like this. If you really want her to get the highest widow’s benefit possible, then you should simply not file for any Social Security benefits. Upon your death, your wife’s widow’s rate will be based on what you would have been due at the time of death.
Let me explain. You get an extra credit of two-thirds of 1 percent added to your benefit rate for each month you delay taking Social Security after age 66. Let’s say you pass away at the age of 68 years and 6 months. That would be a total of 30 months after age 66, meaning an extra 20 percent would be added to your retirement benefit, which would become your wife’s widow’s benefit. So she would get $2,976 per month in widow’s benefits.
But let’s just look at another option. You might want to file for benefits right now. And you could claim up to six months in retroactive benefits. In other words, your benefit start date would be age 67 and 6 months. That would be 18 months after age 66, which translates into an extra 12 percent in delayed retirement credits. So your benefit rate would be $2,777 per month. And that would be your wife’s eventual widow’s rate. That is $199 less per month than the first option I gave you. However, you would get a back paycheck of $16,662. (And that does not include any possible back pay spousal benefits your wife might be due on your account.) Perhaps your wife would rather have that $16,662 (or more) rather than the extra $199 per month. It’s something to think about.
Q: I was getting Social Security disability benefits until I turned 66, at which point they automatically switched me to retirement benefits. In order to try to maximize my Social Security payout, I immediately withdrew my retirement with plans to restart my benefits at age 70 and get the 32 percent bonus for doing so. I turned 70 a few months ago and filed for my retirement. But I was shocked to learn I won’t get the extra bonus. Am I just out of luck?
A: You sure are. You tried a little too hard to beat the system, and instead it beat you. You never should have withdrawn your retirement claim hoping to get the extra 32 percent at age 70. After all, you were getting disability benefits, so presumably, you are not in the best of health. So I wonder what led you to gamble on living a long life and playing these so-called “maximizing” games with your Social Security checks.
Also, in order to claim the delayed retirement credits, the law says you must have never filed a Social Security claim. When you applied for disability benefits, you filed a claim for benefits. And that negated your eligibility for delayed retirement credits. So now you’ve spent four years getting nothing and throwing away many tens of thousands of dollars in retirement checks.
Having scolded you for playing games with your Social Security, I should point out that the Social Security people you dealt with must share some of the blame. When you withdrew your retirement claim, someone should have told you that you would never be able to earn delayed retirement credits. Shame on them!
