CHICAGO (Reuters) - As a retirement columnist, I know it makes sense to wait at least until my full retirement age to file for Social Security. Here’s what I didn’t know: My wife and I could boost our combined lifetime benefits nearly 15 percent through a coordinated series of delayed and spousal benefit filings.
I figured this out using one of several useful tools that have sprung up in recent years to help people maximize Social Security benefits. The options vary from basic free online tools to more robust fee-based services.
Some offer online assistance only, while others will do a personal review by phone for a fee that can range from $20 to a few hundred dollars. Several can link up your Social Security strategy with broader financial planning services so that you can think about your benefits against a backdrop of tax liabilities, your portfolio and other key factors.
The payback in lifetime benefits can total hundreds of thousands of dollars, depending on your longevity.
For individuals, the key decision is the timing of filing for benefits. Filing at the first age of eligibility (62) gets you just 75 percent of your full benefit; waiting until the full retirement age (currently 66) gets you 100 percent; waiting until age 70 gets you 132 percent of your benefit.
And for married couples, an array of other benefit boosters are available based on spousal and survivor strategies.
This is terra incognita for many financial advisers. “Most of the planners I talk to know a little — just enough to be dangerous,” says Jim Blankenship, a planner with special expertise in Social Security and author of “A Social Security Owner’s Manual: Your Guide to Social Security Retirement, Dependent’s, and Survivor’s Benefits.”
SocialSecuritySolutions.com, a fee-based service, offers an easy-to-use tool, backed up by two impressive experts: William Meyer, a veteran of H and R Block Inc and Charles Schwab Corp, and William Reichenstein, a professor at Baylor University who has written extensively on Social Security planning. The two spent 14 years developing algorithms for optimizing Social Security.
“When we started looking at this, it was going to be a three-year project,” Meyer says. “But the Social Security rules are overwhelmingly complex, and the difference between good and bad strategy can be a huge amount of money. Everyone just needs to run their numbers. The tools are available to make a smart decision.”
To get a report, simply input names, marital status, birth dates, best-guess life expectancy along with your projected Social Security benefit at FRA (full retirement age) — which is available at the Social Security Administration website.
I plugged in some optimistic life expectancy guesses (85 for myself, 90 for my wife). For $20, the lowest fee available, I immediately received an easy-to-understand 15-page report. Personal consultation is available for fees of up to $250.
Here’s what was recommended in our case: Although our lifetime earnings records are similar, my FRA benefit is slightly higher. Social Security Solutions’ optimization plan calls for my wife to file for her own benefits at age 67 but immediately suspend her payments — a perfectly legal strategy known as a file-and-suspend.
We start getting some Social Security benefits immediately when I apply (at age 66) to receive a spousal benefit based on her earnings record, half of what she could receive.
At age 70, my wife starts her own benefits; a year later, I switch to my own benefit when I turn 70. Both of our benefits are now at the maximum monthly level possible for the rest of our lives. Later on, after I (gulp) die first, my wife switches to a survivor benefit, which is 100 percent of my benefit.
Another sophisticated Social Security decision-making tool can be found at Analyzenow.com, which was created as a labor of love by Henry “Bud” Hebeler after his own retirement from Boeing Co. Hebeler was a top executive and corporate planner at the aerospace giant and was trained an engineer at the Massachusetts Institute of Technology.
“Boeing provided all the top managers with a financial planner,” he says. “They were pretty good, but the financial tools they had were primitive and didn’t offer much perspective. If I had presented that kind of material to the board I wouldn’t have kept my job. I just thought someone should do something about it.”
Analyze Now features a wide array of free retirement planning services, including a very robust Social Security decision-making tool. You must input a fair amount of data on your own, including estimates of tax rates in retirement, rates of return on investments and future inflation rates. And the tools are spreadsheet-based, so they require basic computer and spreadsheet literacy.
Hebeler does answer questions from users of his site via e-mail — again, at no charge.
Another option is socialsecuritytiming.com, which sells its tools only to financial advisers but offers consumers a free snapshot recommendation on possible spousal options.
The Social Security Administration has a free retirement estimator (here) that pulls up your earning history and lets you estimate your benefit using different filing ages, but no spousal or survivor estimates are offered.
AARP also offers a free calculator that lets you do “what if” planning for taking Social Security at different ages. It also allows you to estimate the percentage of your living expenses that will be covered by Social Security, and it lets you tweak the expense assumptions. Unfortunately, the tool doesn’t include any spousal or survivor decision-making tools.
No matter which tool you choose, backstop yourself by running at least two different tools. All the services are worth no more than the data, rules and assumptions running the engine under the hood. If results from different services are at least similar, you can be confident you’re getting valid results.
(The writer is a Reuters columnist. The opinions expressed are his own. For more from Mark Miller, see link.reuters.com/qyk97s)
Editing by Beth Pinsker Gladstone and Steve Orlofsky