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Retirement Planning > Social Security

Learning Social Security’s ins and outs

By Ed McCarthy, CFP, RICP

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Optimizing Social Security’s retirement benefit has gone from being an obscure, wonkish topic to an essential part of retirement income planning. The system’s complexity can create a temptation to go the black box route: Plug the numbers into a software program and accept whatever recommended strategy emerges. 

The risk with that approach, of course, is that programs are only as good as their code. If the system developers and programmers don’t know about a particular claiming strategy or if an algorithm doesn’t handle a situation properly, an advisor risks giving incomplete or incorrect information. That risk makes it important to understand how Social Security operates.

Social Security Strategies (2nd edition) by William Reichenstein and William Meyer and available on Amazon.com will get you up to speed. The authors are genuine experts in the subject—just witness their ubiquitous media presence. Both are well-known for their many articles on Social Security and the popular analytic program they sell, Social Security Analyzer. 

The book starts with an introduction to Social Security and its terminology. This is useful background material and worth the review, even if it’s just a refresher. The central chapters cover specific demographic groups: single filers, couples and nontraditional situations.

Arrange the material this way allows readers to focus quickly on what they need. The chapters discuss the criteria each group should consider; provides cases for illustration; and presents strategies to optimize the benefit based on the decision criteria. Subsequent chapters cover detailed rules benefits taxation and software 

Given the importance of Social Security’s retirement benefit for many clients, I believe it’s worth the effort to study the system and optimization strategies, although I can’t imagine doing an analysis without software. You might not need to become a claiming expert, but the knowledge will increase your skill with planning software and in interpreting its results.

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