Unusual Social Security Claiming Strategies
Estate and asset protection planning, especially in the current challenging economic environment, often involves taking advantage of every available opportunity to increase our asset base and our income. Most all of our clients at one time or another have questions about Social Security and how to maximize the recovery of their investment in the Social Security system. I recently ran across a report from the Center for Retirement Research at Boston College that provides some unusual claiming strategies for Social Security benefits. Even though the amounts involved may not be huge, these strategies should not be ignored. As they say, "every little bit helps."
Generally speaking, Social Security offers three types of benefits for retired workers or their spouses, or both. First is the basic retirement worker benefit, which is determined by how long an individual works and how much she earns. The second type of benefit is the spousal benefit. The spousal benefit provides a worker's spouse with a benefit when the worker claims his or her own beneft. Finally, there is a survivor benefit. The survivor benefit provides the surviving spouse a benefit after the retired worker's death.
The full retired worker benefit becomes available at the worker's Full Retirement Age (FRA), which currently is 66, but is scheduled to rise to 67. A retired worker can claim a smaller benfit as early as age 62, and a larger benfit by waiting until after the Full Retirement Age, with increasing benefits up to age 70.
The Boston College report provides an overview of three allowable options for claiming benefits that are interesting techniques and may be of value to many folks given the current economic environment.
These methods include:
(1) Borrow and Invest. This method allows a retired worker to begin receiving benefits at age 62, and upon reaching Full Retirement Age electing to repay the benefits received since age 62 and elect to receive the higher Full Retirement Age benefit thereafter. The effect is to receive an interest free loan of the early benefits for a number of years. If invested properly, the advantage is the earnings on the benefits between 62 and Full Retirement Age. If the retired worker dies shortly after repaying the loan, the benefits may not be significant and may even result in a loss. This method suggests that just about everyone should seriously consider applying for benefits at 62, if only for the purpose of investing the funds in savings accounts or CDs or other guaranteed income investments. Then take the principal and repay it at full retirement age, and start collecting the larger benefit.
(2) Claim Now, Claim More Later. This strategy allows a worker to claim one type of benefit while building up delayed retirement credits, which will result in a higher benefit later. This method works for two-earner married couples where the husband is older than the wife, and both the husband and the wife expect similar full retirement benefits. It works this way: after the husband has claimed his benefits, and the wife has reached full retirement age, she files only for a spousal benefit. She then continues working and contributing to Social Security. When she turns 70 years of age, she then files for her own retired worker benefit, which has reached its maximum amount due to the delayed retirement credits. She stops receiving the spousal benefit and switches to her own benefit amount. The Senior Citizens' Freedom to Work Act of 2000 authorizes this procedure. It's purpose is to encourage older individuals to work longer.
(3) Claim and Suspend. This strategy allows a worker who has reached Full Retirement Age to claim his Social Security benefit and then suspend payment, so that his spouse can claim the spousal benefit, and still allow the value of his future benefit to increase. The spousal benefit is equal to half the retired worker's full benefit, if the spouse waits until Full Retirement Age to claim. The wife cannot claim the spousal benefit until her husband claims his benefit. The husband may want to increase his retirement benefit or may want to work longer. If the husband claims, and then immediately suspends his benefit, he enables is wife to receive a spousal benefit while allowing his own future benefit to increase — as well as his wife's survivor benefit, assuming he dies first. The Senior Citizens' Freedom to Work Act of 2000 authorizes this strategy as well.
A full copy of this brief report can be found here.
One of the most effective actions one can take with respect to his or her asset protection and estate planning objectives is to maximize the value of each and every source of income, and that is especially true for retirement income. That includes your Social Security benefits. After all, you probably have paid more into the system than you will ever take out of it. Our objective is to help our clients not only preserve their assets, but to maximize their income before and after retirement. If we can assist you with these Social Security strategies, or in any other with with your planning, please let us know.
Generally speaking, Social Security offers three types of benefits for retired workers or their spouses, or both. First is the basic retirement worker benefit, which is determined by how long an individual works and how much she earns. The second type of benefit is the spousal benefit. The spousal benefit provides a worker's spouse with a benefit when the worker claims his or her own beneft. Finally, there is a survivor benefit. The survivor benefit provides the surviving spouse a benefit after the retired worker's death.
The full retired worker benefit becomes available at the worker's Full Retirement Age (FRA), which currently is 66, but is scheduled to rise to 67. A retired worker can claim a smaller benfit as early as age 62, and a larger benfit by waiting until after the Full Retirement Age, with increasing benefits up to age 70.
The Boston College report provides an overview of three allowable options for claiming benefits that are interesting techniques and may be of value to many folks given the current economic environment.
These methods include:
(1) Borrow and Invest. This method allows a retired worker to begin receiving benefits at age 62, and upon reaching Full Retirement Age electing to repay the benefits received since age 62 and elect to receive the higher Full Retirement Age benefit thereafter. The effect is to receive an interest free loan of the early benefits for a number of years. If invested properly, the advantage is the earnings on the benefits between 62 and Full Retirement Age. If the retired worker dies shortly after repaying the loan, the benefits may not be significant and may even result in a loss. This method suggests that just about everyone should seriously consider applying for benefits at 62, if only for the purpose of investing the funds in savings accounts or CDs or other guaranteed income investments. Then take the principal and repay it at full retirement age, and start collecting the larger benefit.
(2) Claim Now, Claim More Later. This strategy allows a worker to claim one type of benefit while building up delayed retirement credits, which will result in a higher benefit later. This method works for two-earner married couples where the husband is older than the wife, and both the husband and the wife expect similar full retirement benefits. It works this way: after the husband has claimed his benefits, and the wife has reached full retirement age, she files only for a spousal benefit. She then continues working and contributing to Social Security. When she turns 70 years of age, she then files for her own retired worker benefit, which has reached its maximum amount due to the delayed retirement credits. She stops receiving the spousal benefit and switches to her own benefit amount. The Senior Citizens' Freedom to Work Act of 2000 authorizes this procedure. It's purpose is to encourage older individuals to work longer.
(3) Claim and Suspend. This strategy allows a worker who has reached Full Retirement Age to claim his Social Security benefit and then suspend payment, so that his spouse can claim the spousal benefit, and still allow the value of his future benefit to increase. The spousal benefit is equal to half the retired worker's full benefit, if the spouse waits until Full Retirement Age to claim. The wife cannot claim the spousal benefit until her husband claims his benefit. The husband may want to increase his retirement benefit or may want to work longer. If the husband claims, and then immediately suspends his benefit, he enables is wife to receive a spousal benefit while allowing his own future benefit to increase — as well as his wife's survivor benefit, assuming he dies first. The Senior Citizens' Freedom to Work Act of 2000 authorizes this strategy as well.
A full copy of this brief report can be found here.
One of the most effective actions one can take with respect to his or her asset protection and estate planning objectives is to maximize the value of each and every source of income, and that is especially true for retirement income. That includes your Social Security benefits. After all, you probably have paid more into the system than you will ever take out of it. Our objective is to help our clients not only preserve their assets, but to maximize their income before and after retirement. If we can assist you with these Social Security strategies, or in any other with with your planning, please let us know.
Posted by Randy Coleman at 11/15/2008 11:51 AM 
Categories: Social Security,Estate Planning
Tags: trust attorney retirement planning Medicaid rules estate planning estates and trusts beneficiary designation
Categories: Social Security,Estate Planning
Tags: trust attorney retirement planning Medicaid rules estate planning estates and trusts beneficiary designation
Comments