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Don’t base critical benefit decisions on prophets of doom

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POSTED February 3, 2012 8:45 p.m.

Q: I'm about to turn 66. I want to put off starting my Social Security until age 70 because if I do, I'll get an extra $600 or so per month in a delayed retirement bonus added to by Social Security checks. But my husband said I should take my Social Security now because he doesn't think Social Security will even be there in another four years. So should I take it now or wait until age 70?

A: Before I answer your question, let me suggest that you guys better sell all your earthly possessions and move into a cave because I read somewhere on the Internet that the world is going to end in the next couple of weeks!

Dumb idea, right? Well, no offense, but so is your husband's ... or, let me clarify that: He might have the right plan for you, but he's suggesting it for the wrong reason.

I have worked on Social Security issues for 40 years now, and for 40 years, people have been predicting the program's imminent demise. Social Security is not going away. It will change. It has changed a lot in the last 75 years, and it will undoubtedly change in the next 75 years.

And if there are reforms in the next couple of years, those reforms will not impact people like you. Major changes to the program, such as an increase in the retirement age, are phased in over decades. If the retirement age goes up to 68, for example, that change will impact our kids and grandkids, but not old geezers like you and me.

So you should make your decisions based on the Social Security program we have today, not on your husband's nebulous predictions for the future of the program.

And now the question is this: Should you take Social Security at age 66 or wait until 70? I can answer that question if you can answer this question: When are you going to die? Because no one really knows the answer to that question, no one really knows the optimal time to start his or her Social Security. Making that decision is a gamble we all take.

Personally, I would start benefits now, just because I'm the kind of person who wants to spend my money while I'm still young enough to enjoy it. But any good financial planner would probably advise you to wait until age 70 because statistically, there's a good chance that you'll live long enough getting the higher age-70 rate to make up for the money you'd lose by not taking your Social Security now.

You do have another strategy. Assuming your husband is already getting Social Security and because you're 66 years old, you could take a wife's benefit on his record now. You'd get 50 percent of his rate. You could do that until age 70 and then switch to your own Social Security and get that $600 bonus you mentioned.

Finally, here's one other thought. On the same day I got your email, I also heard from a woman who told me her 69-year-old husband just died. He had insisted on waiting until 70 to get his highest Social Security, and he died a few months before that date. She asked about what happens to all the money he'd paid in. (Because she has a very high retirement benefit on her own record, she isn't due any widow's benefits from him.) And the answer is that it's gone — or more correctly, it's paying for someone else's Social Security checks. Something to think about!

Q: In a recent column, you said that illegal immigrants are not eligible for Social Security. While this is true, you were wrong when you said that only U.S. citizens or people living in this country legally are eligible for Social Security benefits. There are instances where non-U.S. citizens are receiving Social Security benefits while living overseas. Will you please correct this error?

A: You are right. In my attempt to emphatically debunk the ubiquitous lie being spread on the Internet that illegal immigrants are routinely getting Social Security benefits and ripping off American taxpayers, I painted my answer with too broad a brush.

In fact, I have written many times in this column about the fact that non-citizens may qualify for Social Security benefits and that in many cases, they can receive those benefits overseas. But these are folks who have legally earned those benefits. For example, I recently wrote about a Canadian citizen who lived and worked in the U.S. for about 30 years. She recently retired and moved to back to Canada, and her Social Security benefits followed her there.

And as you pointed out to me in your email, there are also instances in which a foreign-born spouse of someone who has worked and paid Social Security taxes in the U.S. could receive those benefits while living overseas — although in such cases, there are many restrictions to such payments.

Just as one example, as a general rule, to get a Social Security dependent or survivor benefit outside of this country, a spouse must have spent at least five years living in the U.S. Other conditions also apply. I suggest anyone really interested in this topic read a pamphlet produced by the Social Security Administration called: "Your payments while outside the United States." You can find it at SocialSecurity.gov/pubs/10157.html.

I can tell you that every time I write about this topic, my inbox is immediately flooded with emails that usually go something like this: "No wonder Social Security is going broke if we are sending all our Social Security tax dollars overseas." That's why I like to reassure my readers that only a very small percentage of total Social Security benefits — less than one-tenth of 1 percent — are sent overseas. And then in the vast majority of those cases, the money is going to U.S. citizens who have moved outside the country.

So now, back to the major point I was trying to make in the column you mentioned. People living in this country illegally do not qualify for Social Security benefits.

 

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