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By Alan Gorlick

Part Three

Still breathing heavy from trying to get the Social Security calculator started?  It’s tougher than pulling the cord on your lawn mower.

In this installment we will reveal some of Social Security’s best-kept secrets.  Actually, they are hiding in plain sight, but most people don’t know to look for them.

One of the best for a married couple is to File and Suspend.  In this scenario, the higher earning spouse files at full retirement age and immediately suspends receipt.  The act of filing triggers eligibility for the other spouse to receive the 50% spousal benefit.  The suspension allows the higher earner’s benefit to continue growing to age 70.  Really.

The implications of this strategy can be substantial.  It allows a much wider array of cash, tax, and estate planning than could be achieved either by collecting at 66 or waiting until 70.

Another option is known as, “Claim Now, Claim More Later.”  This is almost a mirror image of the first idea.  In this case, the lower earning spouse claims full benefits, thus making the higher earner eligible for 50% of the lower.  The higher earner continues to delay until 70.

At first glance, this may not seem as brilliant as the first idea.  Why collect 50% of the lower earner when option one yielded 50% of the higher earner?   The reason it’s worth considering is that this alternative does not require the lower earner to suspend benefits.  Thus it yields 50% of the lower earner plus 100% of the lower earner.  The comparison is between 50% of the higher earner (option one) and 150% of the lower (option two).  You need to do the math.

If you make the wrong choice, Social Security will allow a one-time do-over.  If you return all the money within 12 months of the initial claim, you can act like it never happened.  You are only allowed one mulligan and there is no grace period.  However, if you do pull it off, you can even claim back the income tax you paid on the benefits you returned.

Divorced spouses have an extra menu of choices.  If the marriage lasted at least 10 years, the divorce was at least 2 years ago, the claimant is at least 62 and unmarried, that person can claim spousal benefits based on the earnings of the ex.  This does not diminish the benefits for the ex, who doesn’t even have to apply for benefits.  The usual rules apply: that 50% has to be greater than 100% of the claimant’s own entitlement, and the benefits ratchet up and down from 50% as the claimant ages from 62 to 70 and waits to collect.

An interesting sidebar is that someone with multiple marriages can select the spouse with the highest earnings as the starting point for the 50% calculation, as long as all the marriages under consideration were at least 10 years.

The rules around all of these perks, especially those involving divorce, or more complicated than can be summarized in a short article.  Moreover, everyone’s specifics are different.  It’s important to do your own research and solicit advice from appropriate experts.

We hope that armed with information in these articles, you can make better choices, and at least know where to start looking.  I have found that the professionals working at Social Security are friendly, knowledgeable, and anxious to help.  However, it’s likely that their help will take the form of a literal answer to your exact questions.  It’s not their responsibility, nor should it be, to suggest other alternatives or to offer financial analysis.

Alan E. Gorlick, AAMS, is CEO of Gorlick Financial Strategies.  An Air Force Veteran, Gorlick is also a University of Phoenix faculty member, where he teaches MBA and undergraduate finance and economics.  His academic research interest, as well as his focus with clients, is risk management.  He can be reached at alan@gorlickfinancialstrategies.com.