Deciding when to file for Social Security is one of the most consequential financial decisions most Americans will make about their retirement.
Claiming benefits before the Full Retirement Age (FRA) — currently 66 — or later can mean hundreds of thousands of dollars in higher–or lower–lifetime benefits for a married couple.
Social Security: 2,728 Rules
But Social Security’s rules are complex, so most of us could use some guidance. (In a recent Next Avenue post, Laurence J. Kotlikoff, co-author of the new book on when to claim Social Security, Get What’s Yours, said there are 2,728 rules in Social Security’s handbook.)
(MORE: How to Max Your Social Security Benefit)
Yet, finding help making this key decision can be difficult. Social Security Administration staffers can only give you general information about benefit options; they’re prohibited from advising you about claiming strategies.
A growing number of financial planners, however, are learning the Social Security ropes, and several companies have sprung up offering to help you craft a personalized filing strategy for a fee. A variety of robust, free online tools can also help do-it-yourselfers figure out when to begin taking Social Security.
Here’s a “good, better and best” guide to your resource choices:
If you want to roll up your sleeves and work the Social Security numbers on your own, you might start with a good, free online tool that can provide basic answers on when to file. But these tools are only a starting point — they can give you a basic idea about strategies that could help you maximize benefits.
(MORE: Social Security's Trickiest Claiming Rule)
Before using any of them, download the annual estimated benefits statement that the Social Security Administration prepares for you. It’ll tell you how much you can expect to receive from Social Security if you file at your Full Retirement Age, at 70, or at the earliest age you can begin claiming benefits, 62.
Now to the online tools…
Social Security Administration Retirement Estimator: As its name suggests, this Social Security calculator estimates your benefits based on your personal earnings record; it also lets you run scenarios based on alternate filing dates. But you can’t run spousal or survivor scenarios.
T. Rowe Price Social Security Benefits Evaluator: The mutual fund giant lets you input basic information about yourself and your spouse and then select among various Social Security goals — for example, setting different retirement ages for you and your spouse; maximizing lifetime benefits; taking benefits as soon as possible or maximizing income for a surviving spouse.
AARP Social Security Benefits Estimator: AARP’s calculator allows you to do “what if” planning based on taking Social Security at different ages.
Financial Engines, the country’s largest independent advisory service, recently rolled out an online Social Security claiming tool for workers or retirees in 401(k) plans it serves (more on that below). But it also has a free version for the public (Social Security Planner) which computes likely lifetime benefits based on an initial scenario you enter and then walks you through possible options that pay more.
More comprehensive Social Security planning options take into account your basic questions about timing your claim, but give you a bigger picture of how Social Security integrates into your retirement plan. They’re especially useful for households with significant retirement savings.
A growing number of workplace retirement plans are integrating third-party financial advisory services that include this type of souped-up Social Security advice.
For example, that workplace version of the Financial Engines Social Security tool integrates claiming strategies with a broader income-planning tool that incorporates drawdowns from your 401(k) portfolio. One-on-one guidance from an advisor is also available.
Guided Choice, another workplace advisory service, integrates Social Security optimization with saving and spending planning. But it’s only available to employees and retirees participating in workplace plans that the company serves.
Industrial strength Social Security advice comes with a price — but the payoff can be substantial.
These services will help you decide when to claim benefits and how Social Security will integrate into your broader retirement plan. They usually come with personal one-on-one guidance and a more sophisticated approach to questions about taxation and investment portfolios.
If you work with a financial planner, he or she might provide this type of advice. A growing number of planners are learning to provide quality Social Security advice to clients. But some, unfortunately, can steer you down the wrong road.
A 2012 online study of more than 400 financial advisers, by Wharton School’s Pension Research Council, found that planners often focus on the wrong thing when advising clients on Social Security, such as the politics swirling around the program. Advisers, the survey found, also sometimes frame Social Security decisions in terms that mistakenly encourage early filing decisions. And a relatively small number were inclined toward strategies that encourage delayed filing.
One clue about your planner’s Social Security smarts is whether the pro uses software to analyze your choices, such as SSAnalyzer, Social Security Timing, Maximize My Social Security, SS Income Planner or Social Security Explorer.
Several companies that specialize in Social Security claiming can help you design a personalized strategy for a small fee. Some are software based; others connect you with an adviser for one-on-one counseling. Examples include Kotlikoff’s Maximize My Social Security (software costs $40 a year) and Social Security Choices (you get a custom report from its experts for $39).
When evaluating an online or software-based service, look carefully at its usability and complexity. Some require you to input a great deal of information; others don’t. At a minimum, you’ll need to supply your date of birth, Social Security numbers for yourself and your spouse (if you’re married) and the benefits information from your most recent Social Security statement.
Social Security Solutions is one of the best solutions available; it’s from William Meyer, a former executive at H&R Block and Charles Schwab, and Bill Reichenstein, a Baylor University investment management professor and tax specialist. Social Security Solutions is a simple-to-use web-based tool costing $20 to $250. The premium level combines advice on timing your Social Security claim with recommendations for a tax-efficient retirement drawdown plan.
Meyer and Reichenstein have done extensive research demonstrating how maximizing Social Security income also can significantly prolong the life of your portfolio. They conclude that the right Social Security decisions can extend portfolios of $200,000 to $3 million by two to 10 years in retirement.
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