Phil Castell
Castell Insurance
426 E. Washington St., Sequim, WA 98382
Phone: 360-683-9284 • Fax: 360-683-9026
Phil@CastellInsurance.com
www.CastellInsurance.com  

 

Many of my columns are targeted at those people who already are of Medicare age and generally they already are collecting their well-earned Social Security benefits.

 

Today’s article is directed to those who are close to retirement age and have not already elected to take their Social Security benefits. So, if this does not pertain to you, please read as this could be of importance to your friends, neighbors, siblings or children.

 

One of the questions I frequently am asked is, “At what age should I start to take my Social Security benefits?”

 

For single persons this is quite a simple question as their only decision is when to elect to receive benefits. They can choose anywhere between age 62, when they would receive 75 percent of their Full Retirement Age (FRA) benefit, and age 66, when they would receive 100 percent of FRA benefit. For each year you delay, you receive a credit of 8 percent per year, so if you claim at age 70, you would receive 132 percent of your FRA benefit.

 

It is a simple calculation to figure out a break-even based upon those figures and a person’s assumed life expectancy.

 

However, that equation becomes far trickier when it involves a married couple, as each person has nine election options (each year from ages 62-70) or a combination of 81 choices between them. Throw in the added differences in ages, earnings and life expectancy, it would take a mathematical genius to figure out the best option.

 

Well folks, I hate to tell you this, but I ain’t no mathematical genius. However, I have found a website that does all the fun calculations for you. It is www.socialsecuritytiming.com.

 

I have used this website for a few couples and have been amazed at the findings and the options that are available for those who are aware of them. I will share with you a few examples of what I have found.

Strategies for spouse coverage

Two strategies that I was unaware of are called “File and suspend” and “Restricted Application.”

 

Generally a spouse only may collect spousal benefits when the higher-earning spouse has also filed for benefits. Under this scenario, if the higher-earning spouse has reached age 66 (full retirement age) and still is either working or wants to wait for the higher benefits at a later age, he or she can file for benefits and then immediately suspend those benefits. This would allow the spouse to receive spousal benefits while allowing his or her benefits to continue to accumulate and grow until age 70 if desired.

 

The Restricted Application allows you to collect a smaller benefit as a spouse, while allowing your own benefits to continue to accumulate the 8 percent per year credit. At some point in the future, often at age 70, you would switch over to your own, substantially increased benefit.

 

These options are not widely known and people generally are amazed at the differences between the best case scenario and the worst. On the few case studies I have run I have seen the difference between the best case and the worst case choices range from $43,000 to over $100,000 in lifetime benefits that are left on the table.

 

Social Security also is very generous in the additional benefits it offers to married couples including the spousal benefit as well as the survivors’ benefit.

 

The folks at Social Security do a wonderful job in giving advice but their goal is how to maximize your income now, as opposed to looking at the long-term implications of the various strategies available.

 

Another situation was a single lady still working at age 65 who had been divorced 20 years ago. She wants to wait until age 70 to collect benefits but found out that she is eligible for spousal benefits under her ex-spouse’s record and will receive more than $1,000 per month for the next four years.

 

The software is designed as a tool to show people their options and educate them as to what may be available that they were not aware of otherwise. As people are approaching retirement, they are trying to figure out budgets, including projected income and expenses. This, along with a clear understanding of their financial situation, will help people navigate their way to a less stressful and more enjoyable retirement

 

Phil Castell is an independent insurance agent in Sequim. He can be reached at 683-9284 or PhilCastell@msn.com.