Applying for Social Security: The Importance of Timing

Applying for Social Security: The Importance of Timing

Social Security is the only widely available source of income that provides the following combination of financial protections: 1) inflation-fighting increases, 2) longevity protection, 3) investment risk elimination, and 4) spousal coverage.

We observe that many of our clients, when working on their Financial Planning, jump too quickly to the decision to apply at age 62 rather than waiting until they are 65 or older. They fail to understand that waiting to start collecting their benefits will result in a significantly larger, inflation-adjusted stream of income every year throughout retirement. Over time, this can prove to be extremely important. In addition to this somewhat obvious possibility, there are other strategies available to married couples that are little known.

Case Study
Understanding complex Social Security benefit strategies is challenging at best and close to impossible at worst. To provide some perspective, consider this case study found in Social Security Timing (

A 62-year-old couple with one above average earner and one lesser earning spouse, who both live to average life expectancy, could lose over $60,000 in family benefits by making the worst possible decision for when to take Social Security.

–   If they both elect at age 62, they could be losing over $50,000.
–   If they both elect at age 66, this couple could still be leaving $30,000 on the table.
–   Simply delaying benefits isn’t the answer either. If they both delay to 70, they could    be losing over $40,000.

Case Study at Bell Investment Advisors
Here is another example, this one the result of the Social Security analysis we did for a couple who are clients of ours:

Bob is 66; his wife Ann is 67. Neither spouse had filed for Social Security benefits since they are both still employed full time. If both spouses had elected to start receiving benefits at age 62, the expected family benefit over their lifetimes (based on Social Security life-expectancy tables) would be $805,689.30. If they waited until age 66, that total would be $874,169.09.

Through our analysis, we were able to determine the following significantly advantageous alternative strategy (albeit somewhat complicated):

Step 1:  Bob files and restricts his application (Social Security parlance for postponing benefits). This, along with Step 2 below, allows him to collect his wife’s Social Security benefit until he reaches age 70, at which time his own Social Security benefit will have grown to its maximum.

Step 2:  Simultaneously, Ann files for benefits, allowing Bob to collect spousal benefits. She immediately suspends her own benefits, which will allow her to delay retirement credits and enable her to collect a higher benefit at age 70.

By utilizing this little-known, perfectly acceptable strategy, the projected family benefit for this couple over their lifetimes will be $947,224.73, an increase of $141,535.43 over what they would have collected had they both elected to receive benefits at 62, and $73,055.64 over what they would have collected had they elected at age 66.

With this kind of money and the quality of your future at stake, you owe it to yourselves to consult a Certified Financial Planner or Investment Advisor to do a Social Security analysis for you to make sure you are maximizing your options. The Social Security Administration is not in the business of seeking you out for exceptions to the general rules. The onus is on you.

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