“Most Social Security strategies basically revolve around, ‘how do we get the most money out of the
But in reality, most people do not delay benefits until after their full retirement, according to Moisand. In the past two years 45% of men and 50% of women filed for their
Here's a look at why waiting can pay off and important factors advisors should consider when developing
IT PAYS TO WAIT
When a retiree employs the 4% rule—which calls for a 4% withdrawal of the portfolio in the first year of retirement—the portfolio will plummet over a long-term if the retiree claims
But retirees can extend the life of the portfolio by delaying the start of
JOINT LIFE EXPECTANCY
To be sure, Moisand warns advisors that there are times when it doesn’t make sense to delay and planners must consider clients’ life expectancies when helping them decide when to claim.
Of course, he acknowledges that determining life expectancy is not easy and estimating life expectancies for couples further complicates the matter. And muddying the waters even further is a question of whether they should be calculated as individuals or as a couple.
“We have to be careful if we’re talking about a single or a joint life expectancy,” he said. “When we’re doing
It doesn’t matter which spouse dies, for the purposes of benefits, because at the first death, the survivor benefit becomes the higher retirement benefit of the two spouses, he explained. Ultimately, the biggest challenge to assessing life expectancy, Moisand said, is the obvious unknown factor, and it can only be estimated based on tables and other factors.
There are also twists and turns regarding survivor benefits that advisors should know, Moisand said, explaining that clients don’t have to be currently married to someone in order to gain
If a client gets married after age 60 they can still receive survivor benefits on an ex-spouse who they were married to for over ten years. “You’re not stuck with the new guy,” he quipped.
FILE & SUSPEND
Another popular tactic, the file-and-suspend strategy, allows for the client to file for benefits but suspend them, which results in delayed retirement credits while still allowing their spouse to begin claiming spousal benefits.
"If you file and suspend at your full retirement age any time before age 70, when the suspension is lifted you can say I want to go retro," Moisand said.
For instance, he explained, if an individual files and suspends their benefits at age 66 but is diagnosed with a disease at 68 years old they have the ability to lift the suspension and receive a lump sum of money based on the two years of delayed credits acquired. The individual also has the option to forgo the lump sum and instead receive a higher monthly payment than they would have received at 66 had they not filed and suspended.
Purposely restricting an application in order to allow for the younger member of a couple to obtain a spousal benefit until it is time to claim their own provides another way to boost clients' overall payout.
Though this strategy is legal, it's not well-liked by the administration. “The administration calls this aggressive manipulation,” he said. But, “Everyone is eligible for this…Congress put this in place.”
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