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Baby Boomers – Don’t Leave Money on the Table (Part 1)

by | May 15, 2015 | Retirement Planning |

What You Don’t Know About Social Security Retirement Benefits

Each year, millions of dollars of social security retirement benefits are not claimed. The Social Security rules are so complicated and there are so many (almost 3000), that many people don’t know what they are entitled to collect. Knowing what you will collect from Social Security is a critical part of retirement planning. This multi-part Article will explain the rules and provide references and links to help you and your spouse understand and maximize your retirement benefits. Your basic reference is your Social Security Statement, which you can find at This statement shows your estimated benefits at various ages and your earnings record. Your earnings record is important because your retirement benefit is based on your present and past income. To calculate your benefit, Social Security uses a complicated formula, averaging your monthly income in the thirty-five years in which you made the most money, and then adjusting the average amount by an inflation index. If your earnings record does not report all of your income, your retirement benefit will be lower than it should be. If your earnings record is not accurate, it can be corrected with the help of your current or former employer.

Next, you should access your full benefits statement by clicking on the link at the bottom of the estimated benefits page (Print/Save Your Full Statement). Page 2 of the full statement shows the estimated retirement benefits you can collect at ages 62, 66, and 70, your disability benefits, and survivors benefits that family members may collect. On pages 3 and 4, there are brief descriptions of survivors benefits, the laws that may effect your benefits, such as Government Pension Offset and Windfall Prevention, and referrals to seven different publications for more detailed information. You can also visit your local Social Security office for benefit information and forms, but you will not receive advice about the following:

how your filing age determines your lifetime benefits and your spuse’s  benefits

how much you can collect if your spouse files for benefits and you do not file

how to optimize the benefits that your spouse can collect during your lifetime and after your death

how divorce and remarriage effects your benefits and how much your former spouses (all of them) are entitled to collect

how your benefits increase if you continue to work after age 62 or age 66

how your benefits are reduced if you continue to work while collecting benefits

what your filing options are, including my favorite, which is “file and suspend”

how you or your spouse may lose some or all of your benefits under the “Government Pension Offset” and “Windfall Elimination” rules

This is a lot to cover, so this will be a multi-part article. Part 2 will cover the basics. Part 3 and Part 4 will summarize the rules for Spousal Benefits and Survivors Benefits. Part 5 will explain how continuing to work after the first filing age (62) and full retirement age (66) will increase your benefits, and how continuing to work while you are collecting benefits will reduce your benefits. Part 6 will have examples of filing options that will help you maximize your benefits and Part 7 will explain the “Government Pension Offset” and “Windfall Elimination” rules that can reduce or eliminate your benefits.

At times, it may seem that some of the filing options I recommend are “gaming the system”, but remember that you have been paying into the system through payroll deductions since you were a teenager. Currently, 6.2% of your salary, up to $118,500 of earnings, is deducted each pay period. Your employer must pay the same amount. If you are self-employed like me, 12.4% of your salary is paid into the system each year. Since I started working, my combined employee/employer contribution has been almost $200,000 (you can find your combined contribution on page 3 of your full statement). If I had been able to deposit my contributions in an IRA account holding blue chip stocks, I would now have a stock portfolio worth millions. My point is that you deserve whatever you can collect