Make the Most of Social Security Benefits

By Stephen J. Silverberg
New York Elder Law Attorney

Few people realize that a decisions concerning Social Security have the potential to significantly bump up their retirement income. So how do you do it? Kiplinger’s article, “Social Security: Delay or Hit Go?” says that the simple one-word piece of advice is DELAY. Every situation is different, but you’ll make the best decision if you understand how the process works.

Social Security 101. First, a short tutorial on Social Security benefits and how they’re calculated. What the federal government deems you to be at full retirement age benefit begins between ages 65 and 67, based on when you were born. The amount of money that you receive is based on an inflation-adjusted average of your 35 highest-earning years. You can begin collecting Social Security benefits as early as age 62—but your monthly benefit amount will be permanently locked in at about 30% less than your full benefit amount, which depends on your current age, full retirement age, and income. If you can delay taking your benefits, they’ll grow. If you delay until age 70, your monthly Social Security benefit will be about 135% of your full benefit.

Whether you’re better off waiting to get fewer years of higher income or starting earlier to get more years of lower income, really depends on your individual situation. Some of the factors that should be considered, include other income sources, your life expectancy, your spouse’s benefits and your risk profile. While there’s no one correct answer to the question, there are some ways of thinking about benefits that can help you to find the right answer.

Spousal Benefits. If you’re married or were married for more than 10 years and didn’t remarry, you may be eligible for spousal benefits at a maximum of 50% of your partner’s full retirement age benefit.

Interest Rates. Each year you delay taking benefits “earns” you an additional 8% in Social Security income down the road, giving you a very attractive rate of return—and Social Security is guaranteed. Social Security benefits are also indexed to inflation, so when you begin receiving your checks the income will keep pace with the rising cost of living. Think about that fact when choosing between starting Social Security and using your investments to supplement retirement income. It is also important to understand that your decision could affect your estate plan, since using your investment assets could result in less money in your estate.

Your Health. Cash flow is a major reason that folks begin their Social Security early. It’s certainly tough to argue against hardship in exchange for higher income later. By the same token, if you’re chronically ill or in poor health and concerned about your lifespan, delaying benefits might not be the best for you.

About the Author
Stephen J. Silverberg is nationally recognized as a leader in the areas of estate planning, estate administration, asset preservation planning, and elder law. He is a past president of the prestigious National Academy of Elder Law Attorneys (NAELA), and a founding member and past president of the New York State chapter of NAELA.