While the notion of Social Security benefits seems straightforward at first glance, the program is governed by thousands of regulations, resulting in hundreds — some say thousands — of possible claiming strategies for individuals and couples.
For those who are married, these can be narrowed down to 10 to 15 major strategies, according to Marc Kiner, a CPA and owner of Premier Social Security Consulting and co-founder of the National Social Security Association, which offers the NSSA certificate program in Social Security maximization. Kiner pointed out a handful of these approaches:
- Social Security as a joint benefit. For example, if you want the highest survivor benefits for your spouse, you need to delay claiming benefits until age 70.
- Benefits for minor children. Kids become eligible for their own benefits until age 18, once their parents file for benefits.
- Earnings test. If you make more than $16,920 in any year prior to full retirement age, Social Security will withhold some or all of your benefit amount. So if you're making too much, it might not make sense to apply.
- Offset previous low-earning years. Because Social Security benefits are based on your past 35 years of earning, it is important to return to work if possible to offset past low-income years. The fewer of those years, the higher the benefit.
- Ex-spouse benefits. It's important to know that there may be benefits available to ex-spouses or widows and widowers. Generally, you must have been married for at least 10 years and be currently unmarried, and the ex must be collecting Social Security in order to collect on the ex-spouse's account. However, if you have been divorced more than two years, the ex does not need to be collecting. Although the so-called restricted application strategy is being phased out, those who reached age 62 by January 1, 2016, are still able to collect benefits off their spouse's (or ex-spouse's) accounts and then "turn on" their own benefit payments later, when they have grown larger.
Additionally, according to certified financial planner Robert Leitner, president of Financial Advisory Network, those who divorce and then remarry cannot collect on their ex's accounts; unless they remarry after age 60, in which case they can collect survivor benefits.
Social Security's guaranteed compounding behavior from the earliest claiming age (62) to the latest (70) results in a benefit guaranteed to be 76 percent higher, said Ash Ahluwalia, CFP, founder of National Social Security Partners, and this notion can impact other portfolio decisions. For example, conventional thinking around individual retirement accounts is to wait until age 70½ to begin withdrawing funds, while taking Social Security at age 66.
"However, it may be better to do the opposite — take your IRA distribution early and delay Social Security — because the IRA may not grow, but Social Security is guaranteed to grow by 8 percent per year up to age 70," he said.