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Best time to start benefits?
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Q. My husband is 66 years old. I'm only 60. We are having an argument about Social Security. He insists on waiting until age 70 to get his full benefits plus the delayed retirement bonus. I say he should take Social Security now. If he doesn't, he'll be throwing away thousands of dollars. But he says he's run the numbers, and he comes out in the long run by waiting until 70 to take his Social Security. Which one of us is right?

A. You're both right! And you're both wrong! Or to put that another way: only his undertaker knows for sure! In other words, because we don't know how long your hubby is going to live, we don't know if he should take Social Security at 66 or wait until 70.

Personally, I think you are right. He should take his Social Security now. By waiting until age 70, he isn't just throwing away "thousands of dollars," as you say. He's throwing away almost $100,000. He is going to have to live a long time past age 70 — into his mid 80s or so — to come out ahead of the game.

But as I point out so often in this column, most financial planners disagree with me. If your husband is healthy, he probably will live that long. So he may prove you and me wrong and he'll eventually win the "Social Security game." It's just that at age 85, I'm not so sure he'll be really excited about that!

Let me share a story I've told many times about this issue. I have been working on Social Security issues for 40 years now. In that time, I've talked to thousands of widows who told me something like this message I got in a recent email: "My husband recently died. He was 73 years old. He insisted on waiting until 70 to start his Social Security. I sure wish he would have taken Social Security sooner so we would have had more time to enjoy our retirement."

On the other hand, in all those years, I never once have run into an 85-year-old person who told me, "I did it! I beat the system! I waited until 70 to start my Social Security, and now I've lived long enough to come out ahead of the game. I sure am glad I waited!" I'm not saying those folks aren't out there. There are probably lots of them. But I am saying they are not jumping up and down with excitement in the old folks home because they beat the odds!

Q. I am 67 years old. My husband died when I was 63, and I started getting widow's benefits at that time. I never worked very much, so my own Social Security benefit is very small — much less than my widow's check. In a recent column, you talked about widows switching to full benefits at age 66. I was never switched to higher benefits. Should I be getting more money?

A. I'm sorry, but you misunderstood what I wrote in the prior column. I made the point that widows do have the option of taking reduced benefits on one record prior to age 66, and then switching to full benefits on another record on their 66th birthday.

But you have nothing to switch to. You said you took widow's benefits at age 63 because your own benefit was much smaller than your widow's rate. So you certainly wouldn't have wanted to switch to less money on your own account at age 66. You will simply continue to receive your reduced widow's benefits for the rest of your life.

I know this is water under the bridge: but you possibly should have considered taking reduced benefits on your own record at age 62. If you could have survived on that smaller amount of monthly income, then at age 66 you would have have switched to full widow's benefits. It's too late now to do anything about that.

Q. You've written some recent columns about the children of retirees getting Social Security benefits. I am one such retiree — and I have a problem. I have been getting a separate check for my daughter since I retired several years ago. She is about to turn 18 and because she is only a junior, she will get benefits until her 19th birthday. The Social Security office told me that the checks now have to come in her own name. But here is the problem. For the past several years, I have put most of the money from her Social Security checks in a "529 fund." This is money specifically set aside for her college tuition. Now Social Security is asking for all that money back! This isn't fair. I set up that fund for the sole purpose of paying her college expenses, and there will be severe tax consequences for me if I don't use that money for her tuition. How can the government ask for that money back?

A. You can relax about the money in the "529 fund:" the government won't want the money back once you explain to them what you are doing. The rules say that prior to age 18, benefits for your daughter must be paid to either you or her mother. But once your daughter reaches her 18th birthday, Social Security checks must be paid directly to her. As part of that process, they usually ask that you return any conserved funds so that money can be turned over to her. (It's your daughter's money, after all.) However, assuming your daughter is OK with the 529 arrangement, then the money can stay right where it is, and you won't have to worry about any tax penalties.