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Is the maximizing Social Security game worth it?

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POSTED September 20, 2013 9:04 p.m.

Have aging baby boomers turned into greedy geezers? Or are they just being wise and prudent with their Social Security benefits. I'm talking about a trend I've discussed many times in this column: Recent and near-term retirees are gaming the Social Security system (some might call it gambling) to squeeze every last nickel out of their Social Security benefits.

They are primarily employing two specific strategies to maximize their Social Security payout. One, generally called file and suspend, allows a 66-year-old retiree to apply for Social Security retirement benefits, but then immediately suspend those payments, usually so that a lower-earning spouse can claim benefits on his or her record. So the lower-earning spouse gets up to half of the retiree's rate, even while the retiree's benefits are in suspense. At 70, the retiree "unsuspends" benefits and gets his or her full retirement rate plus a 32 percent bonus.

The other strategy, known as the restricted application rule, allows a 66-year-old higher-earning potential retiree to claim 50 percent of a lower-earning spouse's Social Security until age 70, at which point the retiree would switch to his or her own benefits — and they would come with the aforementioned 32 percent bonus.

I have written a fact sheet that explains these strategies in more detail. If you want a free electronic copy, send me an email at (This is the same fact sheet I've offered several times before in this column. So if you've sent for and received the fact sheet in the past, it's the same version as the one I'm still offering today. There is no need to ask for another copy.)

The good news about my fact sheet is that it is free. The bad news is that to find out if and how these strategies could work for you, you would have to get out your calculator and run the numbers yourself.

But there are a growing number of businesses that will provide you with software programs or other services for a fee to help you make the calculations. I don't want to mention or endorse any of these outfits, but a simple Google search using key words like "maximize Social Security" should lead you to any number of these enterprises.

Or better yet, you can check out a recent Wall Street Journal story headlined ""Financing your future: how to maximize your Social Security benefits." WSJ tested and rated five of these maximizing services. They used a fictional couple: Bob and Wendy, both of whom are turning 66 and both of whom are eligible for their own retirement benefits. Bob's monthly rate is $2,182 and Wendy will get $815. They assumed that both Bob and Wendy would live until age 85.

The Journal reports that using the five different programs, and the various maximizing strategies suggested by each, Bob and Wendy would get projected Social Security benefits over the next 19 years (age 66 to 85) of anywhere between $763,222 to $773,500. The WSJ article obviously goes into much more detail than I am providing here.

But one thing the Wall Street Journal didn't do is factor in a sixth scenario: no maximizing strategy at all. In other words, they didn't tell you what Bob and Wendy would have received had Bob simply filed for retirement benefits at age 66, and Wendy filed for a combination of her own retirement and spousal benefits at the same age. And the answer to that question is $746,244.

I am making this point to stress that these maximizing strategies aren't really going to make you rich. To be sure, assuming you live to a ripe old age, you will end up netting maybe $20,000 or $30,000 more over two decades than you would had you simply filed for Social Security benefits in the regular manner. But you have to ask yourself if that extra money is worth the risk.

And the risk is this: "Are you going to live until that ripe old age?" For example, in several of the strategies suggested by the Social Security maximizing services, Bob would file and suspend and thus not get any Social Security benefits until age 70. In other words, he is essentially throwing away $2,182 per month for four years gambling that he will live until his mid 80s to beat the system. And if he has a heart attack and dies at age 69, what then? Well, then Bob would have lost the Social Security gamble.

As I've reported before in the column, throughout my 40-year career of working on Social Security issues, both as an employee of the Social Security Administration and now as a columnist, I have met or communicated with thousands of widows who told me that their husband delayed benefits (usually until age 70) because he expected to live until his 90s. But then he died in his early 70s and each widow usually told me something like this: "Gosh, I wish he would have retired earlier so we would have had a chance to enjoy our retirement together."

And in that same 40-year career, I have never once run into an 85 year old who came up to me and shouted with joy: "I did it! I lived long enough to beat the system!" I'm not saying those folks aren't out there. Of course, they are. But I am saying that once they reach that age, they might not be jumping up and down with excitement at having won the Social Security game.

Just something to think about as you consider gaming the Social Security system by employing your own maximizing strategies.


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