Maximize Your Clients’ Social Security

By Michael Ham
DECEMBER 4, 2011

The Dalai Lama was asked what surprised him in life the most. He replied, “Man, because he sacrifices his health in order to make money. Then he sacrifices money to recuperate his health.” Why do we fret so much and make ourselves sick? Simple answer: money or the lack of it. Struggling and striving to get paid just may be the root of all evil. But, hey, baby has to eat and get new shoes.

Social Security may be broke and busted but it’s still writing checks; make sure your clients get all they can before it changes. Here are three super secrets for married folks:

1. Pick which retirement you want, yours or your spouse’s. Obviously, it’s best to select the one that pays you the most. Usually in a marriage there is a huge difference in wages. But even if the lower wage earner has her own Social Security benefit, she may elect to receive an amount equal to half of her spouse’s instead. This is called your “Spousal Benefit.”

2. Double dip. A person who has reached full retirement age could elect to take his Spousal Benefit and delay taking his own benefit. Working or not, you can take your Spousal Benefit and delay your own and let it grow until you’re age 70. It doesn’t matter if your spouse is taking her Social Security benefit or not. And upon age 70, if your own benefit is higher than the Spousal Benefit you’ve been receiving, just swap and take your own. That’s more money for you now and potentially more money for you later.

3. Getting paid to wait. Typically when one spouse hasn’t worked outside of the home as much as her mate, she won’t have much if any Social Security benefit and will default to receiving her payments when her higher-earning spouse retires and decides to start taking payments. Do not wait. Once both spouses reach full retirement age, the higher earner should go ahead and file for his Social Security benefits, while the lower-earning wife files for her Spousal Benefit. Then, the husband can immediately suspend his benefit request, and his benefit amount will continue to increase (by about 8 percent per year, too). Then, when he reaches age 70, he can re-file to start taking his benefit.

This will give the wife a monthly benefit. She does not need to wait until her spouse fully retires and starts taking his benefit before she can. Very cool idea!

Michael Ham is a financial planning expert and personal budget coach. He is the founder and president of My Money Track and founder of J. Michaels Advisors in Dallas. For more information, go to www.mymoneytrack.com.