By SYLVIA GORDON
Guest Columnist
Almost all the loopholes in Social Security planning have been plugged. Almost all. One great strategy that remains allows widows and widowers to “optimize” your benefits by choosing which benefit to draw first and then switching later.
You qualify for a Survivor benefit from Social Security (also known as widow or widower benefits) if you were married at least one year to your spouse or 10 years to your prior spouse, you haven’t remarried before the age of 60, you are at least age 60, you are not working full time prior to your full retirement age (FRA).
That was a mouthful of rules, but stay with me: The key part of this rule that flummoxes men, is that you can ONLY draw a Survivor benefit if it is more than your OWN retirement benefit. For most men, that means they won’t be able to draw as a widower, because they always out-earned their spouse.
For women, traditionally the husband has out-earned her, and widow benefits are another confusing choice she has to make alone. While the Social Security Administration is prohibited from giving advice, they will tell you which benefit pays you the higher amount and help you apply for that benefit. That’s where their help stops, and my help in this article begins.
Take my parents for example. They both worked and paid their FICA taxes their entire working life. My mom raised five kids, but also worked outside the house. Dad had higher earnings, but hers were close to his. At retirement, they each drew their own retirement benefit. But if Dad passes away, Mom can draw his full Social Security benefit since it will be higher than her benefit. This is where the strategy comes in. Mom’s own retirement benefit can continue to grow. Between age 66 and 70, Social Security pays a guaranteed 8 percent return to entice people to draw their benefits later.
As a widow, mom’s own retirement pot of money can grow and max out at age 70. If her own pot of money eclipses her Survivor benefit – she can switch up to the higher benefit at any time, but no later than age 70. Don’t expect the government to help you make this switch. You need to understand your choices and be prepared to “optimize” your monthly benefits if your own earning’s outgrows yours deceased spouse’s amount. The reason this strategy works is because once you start drawing any type of Social Security benefit, it stops growing. You lock in that amount for the rest of your life. Yes, you get a tiny cost of living increase each January, but in general, your amount will be the same amount until you die.
You can figure out if this strategy will benefit you once you know when you’ll draw your benefits and when your spouse will draw. Once you have those two amounts, it’s simple math. You can find out these amounts by calling your local SSA office.
Sylvia Gordon is co-founder of The Medicare Family, headquartered in Noblesville, where she educates thousands on Medicare and Social Security in all 50 states. You can learn more at themedicarefamily.com.