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Gambling with Social Security

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POSTED May 11, 2012 9:18 p.m.

I find it rather curious that baby boomers, many of whom, in their youth, decried the accumulation of wealth and the materialism of their parents, are the first generation in history to regard Social Security not as the safety net it was intended to be but rather as a pot of gravy to pour over their already meaty investment portfolios.

I'm not saying this is a bad thing. In fact, it is just the opposite. People have always been encouraged to plan for their retirement. And baby boomers have, by and large, done a good job of that. Social Security was never meant to be a person's sole source of income in retirement. Instead, it was meant to be one leg of the proverbial three-legged stool that should prop up your retirement nest egg — the other two legs being a pension or IRA account and whatever savings or other investments you are able to accumulate throughout your working life.

It's just that all this focus on Social Security as an investment, sometimes even as a gambling stake, is still a relatively new phenomenon — especially to a guy who spent most of the last 40 years helping folks sign up for Social Security. And almost all of those people simply applied for benefits at 62, or maybe 65 — and just let the checks start rolling in without giving it too much thought. A Social Security check was simply something you got in your old age, and you used that check to pay the rent or buy groceries.

Today, more and more folks are trying to "game" the system — doing their utmost to squeeze every last nickel out of their Social Security investment. They are putting off taking Social Security until age 70 in order to get a 32 percent "delayed retirement bonus." Many are claiming benefits as a "dependent" husband or wife off of their spouse's Social Security account at age 66, and then living off that smaller amount until age 70 when they switch to their own retirement account — with that added bonus. Until the law was recently changed, others were filing for reduced Social Security benefits at 62 and investing every dime of that money while they lived off of other retirement accounts. Then at age 66, they would pay back all the benefits they received and file a new claim to get full benefits from that point on. They came out ahead of the game because they were able to pocket whatever interest they earned on the benefits received between age 62 and 66. The government realized they were essentially providing interest-free loans to wealthy retirees, so they put a stop to that practice.

Again, I am not saying that treating Social Security as an investment is bad. Whatever you get from Social Security is your money, after all. And if you want to work within the rules to get the highest return out of that money — well then, more power to you.

But I have been more than a little taken aback by the obsession some people seem to have gambling with their Social Security benefits. People who delay their Social Security until 70 are throwing away tens of thousands, some approaching one hundred thousand dollars, in Social Security benefits, betting that they will live into their mid 80s to "beat the system." But I've got to wonder, even if they live that long, will they really be able to enjoy their Social Security "winnings?" Lots of folks are taking that chance. And I can tell from the tone of their emails that they're really not sure they are making the right wager.

All of this came home very clearly to me recently after I offered my readers a copy of a fact sheet I called, "When to take your Social Security benefits." It was intended to present people with the facts — with the advantages and disadvantages of taking reduced retirement benefits as early as 62 versus waiting until age 66, or even 70, to get full benefits. And I'm afraid I fed some people's manic desire to gamble with their Social Security by offering some tips for "maximizing" one's Social Security payout.

Most of my readers take this advice for what it is worth. They will sit down, perhaps with a financial planner or with someone at their local Social Security office, go over all the numbers, consider their options, and then make a rational decision based on the facts.

But some of my readers aren't being rational. They are going way overboard. They sent me lists with dozens of different options and asked me to help them make the right choice. Some sent me matrixes. Others sent me spreadsheets with more data on them than I've seen in the annual reports for major corporations. One guy had figured out what he would get from Social Security in 25 different scenarios: file at 62, die at 90; file at 66, die at 85; etc. He said he was losing sleep trying to figure out what to do! A little financial planning is good. But trying to squeeze every last nickel out of the system is maybe too much?

And I noticed that almost all of the folks who sent me emails fretting over their Social Security decision were not between a rock and a hard place. They were, financially speaking, between a cushion and a soft place. No matter what they chose to do with their Social Security, they were going to be living very comfortable lives in retirement.

My wife and I both took our Social Security benefits at age 62. It might not have been the smartest decision in the world. But guess what? We don't care. We are having way too much fun enjoying life and our retirement.

So the message to my readers is this: study the information I give you; maybe give some second thoughts to delaying benefits too long; then make a decision about when to take your Social Security that you are comfortable with — AND ENJOY THE REST OF YOUR LIFE!

If you have a Social Security question, Tom Margenau has the answer. Contact him at thomas.margenau@comcast.net. To find out more about Tom Margenau and to read past columns and see features from other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com.

 

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