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:
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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.
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.