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The Huge Payoff From Claiming Social Security Wisely

3 cases show how it's possible to receive tens of thousands extra

By Laurence J. Kotlikoff

(Boston University economist Larry Kotlikoff has been answering questions about claiming Social Security benefits for PBS for over three years. His book (co-authored with PBS NewsHour’s Paul Solman and columnist Phil Moeller), Get What's Yours: The Secrets to Maxing Out Your Social Security, was a New York Times bestseller. He is also the developer of, a Social Security benefit maximization tool. Please click on this link to pose your Social Security questions to Larry and see Larry’s previous Q&As.)

By my count, I’ve answered over 1,500 questions about maximizing lifetime Social Security benefits, either online or on the air. But, by their nature, my A’s to people’s Q’s have mostly been general. They haven’t, I fear, provided people with a clear sense of how much money is at stake in making the best decisions about claiming Social Security retirement benefits.

Claiming Social Security Cleverly

So today I’m going to provide three made-up examples (using my company’s software) of how much money is up for grabs. As you’ll see, the extra cash people can get from claiming Social Security cleverly can be huge. And it comes with no risk.

All you have to do is ask for the right benefits at the right time and, voilà, you’re richer. This is true money magic.

I'm hoping these examples will spur you and your loved ones to think carefully before signing up to start claiming Social Security. My sense is that the vast majority of the 10,000 boomers retiring every day are making the wrong decisions when it comes to Social Security — decisions that are costing them big bucks.

Case No. 1: Single Joe

Let’s start with Joe, who just turned 62, never married and recently retired from his $50,000-a-year job. Like over 40 percent of the public, Joe is planning to retire and take his Social Security as soon as possible, which in Joe’s case is immediately.

One reason: Joe expects to die at 80, which is when his dad and uncles passed. But Joe can’t count on dying on time. He needs to look at the worst-case financial scenario. That’s living to his maximum age of life, which I’m assuming is 100, and running out of money.

Joe’s optimal strategy for claiming Social Security retirement benefits, actually, is to wait until 70. Then, he’d collect a 76 percent higher, inflation-adjusted retirement benefit. OK, but how much more money would following this optimal strategy deliver?

Well, if Joe take his benefits at 62, his lifetime Social Security income comes to $580,610. But if he waits until 70, it rises by $153,910 to $734,520. (All these figures, by the way, are present values, meaning they are the current value of the future income.)

But what if Joe is too short on funds to make it to 70?

My first answer is that Joe should keep working if he can.

My second answer is that Joe should tap into his retirement funds and other savings, assuming he has some.

My third answer is that Joe should downsize his home or move to a cheaper location, like Mexico.

My fourth answer is that Joe should move in with his 96-and-9-months-year-old mom (That’s my own mom’s age!).

Whatever it takes, Joe should wait as long as possible to start collecting Social Security.

But what if Joe dies at 69? How’s he going to feel having lost all his Social Security by following some economist’s advice?

Actually, Joe will won’t be feeling anything if he’s dead. Living, not dying, is the big financial risk and receiving 76 percent more in monthly benefits from age 70 on has a real, measurable value to Joe, namely $153,910. That’s money magic.

Case No. 2: Married Liz and Jane


Like Joe, Liz and Jane are in their early 60s and have just retired. Liz is 60 and Jane Is 64. Liz earned $53,000 last year and Jane earned $71,000. Neither Liz nor Jane have saved a penny. But, fortunately, when Liz’s great aunt died, she left Liz enough money to tide them over, so they can both wait until 70 to start claiming Social Security.

The problem is that, for them, waiting until 70 is the wrong move.

Instead, Liz should take her Social Security retirement benefit at 62 and, thereby, enable Jane to take her Social Security spousal benefit at 66. Jane is grandfathered under the new Social Security law, so she can collect just her spousal benefit (equal to half of Liz’s full retirement benefit) and let her own retirement benefit grow until age 70. For Jane to collect a spousal benefit, Liz has to be receiving her retirement benefit.

When Jane reaches 70, her spousal benefit will go away because she’ll start collecting her higher retirement benefit on her own earnings record. What should Liz, who will then be 66, do at this point? She should then suspend her retirement benefit and restart it at a 32 percent higher inflation-adjusted value at 70.

Gee, this involves a lot more back and forth with Social Security. Is it really worth it?

It sure is. If Liz and Jane follow this optimal strategy, they’ll add $49,123 to their joint lifetime benefits from Social Security. That’s more than a year’s after-tax earnings for either of them! That’s money magic.

Case No. 3: Widowed, Divorced Molly

Molly’s 60 and her ex-husband just died. They were married for 11 years, none of them pleasant. Molly hadn’t seen or heard from Chuck the Jerk (what she called him after they split) in 30 years and has no idea what Chuck earned. Turns out, he ended up making a decent salary once he was forced to support himself; $60,000 a year was his final annual pay.

Molly, who just retired from a $120,000-a-year job, plans to start claiming her own Social Security benefit at age 62, the earliest she can. If she does, she’ll end up with $662,647 in lifetime Social Security benefits.

But if she waits until 70, Molly will pick up another $184,924. Doing so, however, would still leave money on the table.

Fortunately, Molly’s 21-year-old goddaughter, Julie, comes to the rescue.

Julie has spent the summer interning for a financial planner and knows all about Social Security divorced widow’s benefits. Within minutes, Julie figures out that Molly is eligible for divorced widow’s benefits starting immediately and should claim them. And, she says, Molly can and should wait until 70 to collect her own retirement benefit.

The combination of these two decisions will provide Molly not with an extra $184,924 compared what she had planned, but an extra $355,532! Molly’s lifetime benefits will be $1,018,179 if she optimizes her Social Security collection decisions.

Good golly Miss Molly, but that’s a whole lot of Social Security money magic!

Laurence J. Kotlikoff
Laurence J. Kotlikoff Laurence Kotlikoff is a co-author of “Get What’s Yours from Social Security” and a professor of economics at Boston University. Read More
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