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Retirement Planning > Social Security

Kotlikoff: 5 Tips to Navigate Social Security Filing

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Understanding how to maximize Social Security benefits is becoming a growing part of the services that many financial advisors provide, but it can also be one of the most difficult.

That’s not just because of changes to the file-and-suspend benefit rules of Social Security, which take effect this year and restrict that benefit to a limited number of couples. (The spouse who files and suspends must be 66 years old as of May 1, 2016, and submit his or her request to file and suspend by April 29;  the other spouse, who will receive that spouse’s benefit, must be 62 years old as of Jan. 1 of this year.) It’s also because Social Security is complicated, and even the workers at the Social Security Administration may not fully understand it.

In a webinar today on the new changes to Social Security rules, Boston University economics professor Laurence Kotlikoff offered several pointers to his audience about Social Security that could be of particular interest for financial advisors:

Social Security workers get things wrong, often

1. Social Security Workers Get Things Wrong, Often

“People in Social Security offices don’t seem to understand the new law,” said Kotlikoff, who’s also author of “Get What’s Yours — the Secrets to Maxing Out Your Social Security Benefits.” He then recounted stories of several retirees who were given erroneous information by their Social Security office.

In one case, the 66-year-old female CEO of a major publishing house went to her local Social Security office asking if her husband, who will turn 66 in August, could collect benefits based on her work record. She was told he could not because he would not be 66 – full retirement age – by the end of April.  “That was 100% wrong,” said Kotlikoff. “The rule is very clear about the deeming provision kicking in only if you’re not 62 by the end of last year.”

In another, a single woman who had never married took her benefits at age 64, then wanted to suspend them at 66 before taking the benefits again at age 70. She was told by Social Security that she could not suspend benefits and should have told Social Security years earlier about those plans. She called Kotlikoff, who advised her to go to the Social Security office and ask for a supervisor. She was then told the same thing – eventually talking with seven different people “who had it wrong,” said Kotlikoff.

Then he got involved, called the Social Security office and said he was going to write about this situation in his PBS Newshour column. By Monday morning, he got a call from someone in that office who had worked for the Social Security Administration for 30 years, saying he would check into the matter.

“The eighth person didn’t know about suspending benefits,” said Kotlikoff. But that person called him back saying that Kotlikoff was “absolutely right.” Kotlikoff concluded that there’s a 100% chance that Social Security personnel will get it wrong.

Tell, Not Ask

2. Retirees Should Tell Social Security What They Want to Do, Not Ask

Retirees need to have the right information about their benefits — which their financial advisors can provide — and then tell Social Security what they want to do, preferably in writing. They should not ask Social Security workers questions about their benefits and expect to get the right answer, says Kotlikoff.

He recommends that retirees specify in writing in the remarks section of their application what they want to do, such as claim spousal benefits, and be definitive and clear. “The application form can be misleading,” said Kotlikoff. It says on top that you’re filing for all available benefits even when you’re not always doing that. You can’t undo that statement. The only place to specify … [what you want to do] is in the remarks section.

If someone wants a spousal benefit and the spouse has already applied to file and suspend and won’t take benefits sooner than his or her 70th birthday, “that has to be in writing … definitive and clear,” said Kotlikoff.

File for Social Security online

3. File Social Security Applications Online Rather Than by Phone or in Person

“It may be safer to file for retirement benefits and spousal benefits online,” said Kotlikoff. In that case, retirees can state exactly what they want to do, and specify in the remarks section of the application form. “You can’t write what you want by phone,” said Kotlikoff. Filing online can also avoid the problem of a worker at a Social Security office writing down the wrong information.  Widow and child benefits, however, cannot be applied for online, said Kotlikoff.

Specify when you want to take Social Security benefits

4. Specify When You Want to Take Social Security Benefits

Retirees at full retirement age — now 66 or older — need to specify the exact date they want to begin taking benefits in the remarks section of their social Security application.  Otherwise Social Security will provide six months’ worth of retroactive benefits in a lump sum, which will have the effect of reducing future monthly Social Security payments.

Kotlikoff  gave the example of a retiree who wants to start collecting benefits at age 70, not before. He has to specify in the remarks section that he does not want her benefits to begin a day before his 70th birthday. “Otherwise he will get six months retroactive payment,“ which results in the loss of what’s known as Delayed Retirement Benefits — higher payments in exchange for claiming later — reducing his monthly payments from then on.

Keep track of ex-spouses

5. Keep Track of Ex-Spouses if You’re Collecting Their Spousal Benefits

Kotlikoff recounted the example of an ex-wife who’s 63 and made the grandfather cutoff to collect under file and suspend. She can file for full spousal benefits of an ex-spouse when she reaches full retirement age at 66, then collect those for four years until the larger retirement benefit kicks in at age 70. At that point, if the ex has passed away she can take the larger of two benefits – the divorced widow or the divorced spouse. “One wants to keep track whether the ex is still alive,” said Kotlikoff.

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