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D. Frank Norton: Making the most of Social Security

It's Your Money

Posted: September 15, 2010 8:55 p.m.
Updated: September 15, 2010 4:55 a.m.

Many of us are approaching, or have already passed, the minimum age when we can start taking Social Security benefits. For this column, I would like to share my experiences so that perhaps you can benefit.

I have now turned 66 years old (Shhhh ... don’t tell anyone that I am that old, OK?). My wife is turning 63 the latter part of this month (not a good idea to let that fact out either as she might be just a tad upset). My spouse had minimal earned income during her life, so her personal Social Security benefits are not that great. She would be far better off taking one-half of my Social Security benefits.

I have elected to wait until I turn 70 to begin receiving my Social Security benefits. Why? I believe that I will outlive the breakeven point where my benefits will be the same whether I start taking Social Security at 66 or at age 70. That breakeven point is age 82. In addition, I plan to continue working well past age 70 so that income won’t be an issue for me until then or later.

Now, what should we do regarding my wife’s Social Security benefits? She can receive either half of my benefits if I were to start taking my benefits now, or she can begin receiving benefits now based on her own earnings.

In my wife’s case, the monthly Social Security check would be only about $150 per month based on her own earnings. If based on half of my Social Security benefits, the amount would be substantially greater.

My objective is to maximize the monthly payout for both my wife and I. In this case, I am electing to have my wife receive payments based on her own earnings. When she turns 66, she can then switch over to Social Security payments based on half of my benefits.

By waiting until she turns 66, she will begin to receive 8 percent more in benefits for each year she waits. In this case, going from 63 to 66 she will receive about 24 percent more in Social Security payments than she would if she started now.

In the meantime, she will be receiving about $1,800 per year for the next three years. I do believe we can find some use for that additional income.

Why start her payments at 66 instead of waiting until 70 for her? The reason is that the spousal benefit stops growing at 66. To wait any longer will not increase the benefit. I will be 69 when she turns 66. In order for her to get half of my Social Security payment at that time, I will also have to apply for Social Security benefits to start being paid.

“But wait a minute,” you say. “You wanted to wait until you are 70 to start taking that benefit.” Yes, I did say that. So what do I do? Well, the answer is that I can apply for the Social Security benefit at age 69 then immediately suspend that benefit until I am 70. My wife’s benefits will continue unimpeded.

In future columns, I will strive to point out other Social Security strategies to help those struggling with how best to structure their own Social Security payments. There are significant pitfalls to watch out for also. Let The Signal know if you would like me to post more ideas on this topic in future columns. In the meantime, happy retirement.

D. Frank Norton is a CPA, Money Manager, and Certified Financial Planner in Santa Clarita. “It’s Your Money” appears Thursdays and rotates between a handful of the Santa Clarita Valley’s financial professionals. His column represents his own views and not necessarily those of The Signal.


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