Everything Matters When it Comes to Claiming Social Security

Over the past 10+ years I’ve had the distinct pleasure to work with several thousand individuals and couples, in helping them determine when and how to claim Social Security benefits.  No two people are alike and thus cookie cutter advice is unacceptable!  According to the Social Security Administration there are over 8,000 claiming strategies available for couples and more than 2,700 separate rules on claiming benefits.  Thus, there is no room for over the counter software, unresearched recommendations or prejudicial decisions when it comes to making the biggest or at least one of the biggest financial decisions most American’s will ever make!

What’s your check out date?

Determining an individual’s or more importantly a couple’s joint life expectancy is the elephant in the room.  Since we do not know, nor do we want to know the exact date we’ll be called home, one must resort to the SAG principle!   It is part SCIENCE, it is definitely an ART and most importantly it is a GUESS.

Besides Longevity other issues that need to be addressed are;

  • Not knowing the checkout date means it is absolutely critical to understand the importance and consequences of when and how your claim benefits. How does a 62 claiming decision affect myself and my wife, now and 30 years from now?  Should both spouses delay claiming in order to maximize long term benefits?  Should they both claim at Full Retirement Age? Should we hedge the bet and have the higher earning spouse delay until 70 while the lower earning spouse claim early?  There are any number of alternatives that need to be discussed and analyzed.
  • Current health and family longevity is of critical importance. Although there is no guarantees in life, when the only certainty is uncertainty one needs to underwrite the claiming strategy.  Much like an underwriter working for an insurance company underwrites a life insurance or long term care policy.  Healthy people who live with purpose (see below) or who have parents who are still alive or lived into their 80’s, 90’s or 100’s means a lot!
  • What other assets are available? How many clubs do you have in the bag?  The more financial options one has available the more important it is to integrate social security into the overall strategy.  What is extremely sad is that 50% of retirees have only social security (one club in the bag).
  • How much money do you have in retirement plans? IRA’s, 401k’s, 403b’s, etc.?  What were they all initially designed to do?  The answer was to create a lifetime income for a husband and wife for as long as they live.  Some people mistakenly believe they should claim Social Security early thus leaving IRA type assets to children and grandchildren! Doing so might actually mean less money for them, besides the fact that they will have to pay income taxes on those funds and take the money out over a 10 year time frame.
  • Is work or part time work in your plans? What are you going to do in retirement?  In my 40 years in the business and studying retirees I have found that the people who stay involved and have a purpose tend to live longer and have happier and more satisfying lives.  The couch potato, the full time vacationer and the 6 day per week golfer (courses are closed on Mondays) do not seem to live as long as those who continue working.  I personally feel that the future of American Retirement is Phased Retirement!  Those who can afford to retire won’t want it and the vast majority of American’s won’t be able to afford it.  Graduation from high school or college is called Commencement and means moving on to a new phase of life.  Retirement from one’s current work is also a Commencement to a new phase of life.  Maybe one that involves redefining oneself, uncovering latent talents, dusting off long shelved dreams or passions.  It is a time for embracing new challenges and opportunities.
  • One of the more confusing issues in claiming Spousal claiming benefits is if one or both spouses receive a pension from a job where they did not pay FICA / Employment taxes. School teachers, police and firefighters are subject to the WEP & GPO issues relating to Social Security and spousal benefits.  What are the options and consequences and planning strategies?

These are just 6 of issues that need to be discussed and researched prior to making a social security claiming decision.  As I said many times to several thousand CPA’s throughout the Southwest, no one should ever claim benefits until they run the numbers and have a discussion with someone who truly understands Social Security.

Client Workshops

The fall of the year has historically been the best time, especially for CPA’s to host Social Security workshop for their clients, their friends and associates who are approaching or already in their 60’s.  If you are interested in hosting such an event or know of a civic organization, church or corporation that might be interested, please let me know and we can discuss.

Ya’ll pray for rain!

David P. Zander
CFP Emeritus Board ™