Where to Get Help to Claim Social Security Wisely
Deciding on when, and how, to claim Social Security can be the difference between a decent retirement and a terrible one
Choosing what age to start collecting Social Security retirement benefits and which type of benefit to claim shouldn't be difficult. But boy, is it!
"There are twenty-seven hundred and twenty-eight rules in the Social Security handbook," Boston University economics professor and Social Security maven Laurence Kotlikoff told me on my new "Friends Talk Money" podcast episode. "And then there's literally hundreds of thousands of rules about those two-thousand seven hundred and twenty-eight rules. It's the most complicated system I think mankind has ever developed."
70% of American workers said they wished they were more knowledgeable about Social Security.
That's why I'm not too surprised at these findings from a recent Nationwide Insurance survey: Only 6% of the American public said they know all the factors that determine the maximum Social Security benefits someone can receive and just 39% know the age they'd be eligible to receive what are known as Full Retirement Age benefits. (These days, that age is between 66 and 67, depending on when you were born.)
Another Social Security survey, from the global investment manager Schroders, found that 70% of American workers said they wished they were more knowledgeable about Social Security.
Confusion and Mistakes Claiming Social Security
And a 2019 study by two USC researchers concluded that "most individuals face significant uncertainty about the amount of Social Security retirement benefits they will receive after retirement and that they tend to overestimate these amounts."
Kotlikoff believes at least half, if not 70%, of people claiming Social Security benefits "are making major mistakes."
Fortunately, there are now a variety of ways to get help making smart Social Security claiming decisions – from websites, apps and software to Social Security specialists you can hire. My "Friends Talk Money" co-hosts Terry Savage, Pam Krueger and I shared information about them in our new episode; highlights from it are below. (You can hear the whole episode wherever you get podcasts or at the end of this article.)
"The name of the game is to not leave money on the table," said Krueger, host of public television's MoneyTrack and founder of the Wealthramp service that vets financial advisers.
That guidance is especially true for married couples and divorced people, who often have the most complex claiming decisions.
The Basic Math About Social Security Benefits
First, though, it helps to understand the basic math about Social Security benefits.
You're generally allowed to start claiming them at 62. But the size of your benefits will be reduced for every year you claim before your Full Retirement Age. And for every year you delay claiming between your Full Retirement Age and age 70, your Social Security benefits increase by 8%.
"Do not take Social Security benefits early," if you can avoid it, urged Savage, so you won't see your benefits reduced.
But things are never simple when it comes to Social Security.
The size of your benefits also depends on — among other things — how much you earned each year; how many years you worked; whether you are single, married, divorced or widowed and, if you are married, your spouse's employment history and Social Security claiming date.
Kotlikoff says there are 11 different Social Security benefits. That complexity is why it pays to get help making Social Security claiming decisions.
In addition, you may need to factor in the Social Security penalty for earning employment income while collecting benefits before your Full Retirement Age. That's known as the earnings test.
How the Social Security Earnings Test Can Ding You
"If you take Social Security early, Social Security withholds one dollar of your benefits for every two dollars earned over eighteen thousand nine hundred and sixty dollars this year," explained Savage. "If you wait until the year you do reach Full Retirement Age and are still working, the test is a little more generous. You forfeit one dollar in benefits for every three dollars in earnings above fifty thousand five hundred and twenty dollars."
"In my experience, [Social Security staffers] give the wrong answer or misleading answers half the time."
The first place to start for claiming information is the Social Security website. There, you'll want to set up a free "my Social Security" account to see your earnings history for Social Security and an estimated projection of your benefits.
But the Social Security Administration site has a big limitation for married couples: You can't see Social Security benefit numbers for the two of you together.
You can also get claiming information from Social Security staffers by phone (through your local office or the national toll-free number, 800-772-1213). Social Security field offices remain largely closed due to COVID-19 restrictions.
But Kotlikoff urges caution about information you receive from Social Security employees.
"In my experience, [Social Security staffers] give the wrong answer or misleading answers half the time," he said. "These people are underpaid, they're well-meaning, but they're overworked and undertrained."
Turning to Calculators, Apps and Advisers
You can get ballpark figures for your Social Security benefits at different ages by using free online calculators (from places like financial services firms, the federal Consumer Financial Protection Bureau and AARP) or by paying for Social Security claiming strategy software. Kotlikoff's Maximize My Social Security, for instance, costs $40 a year; Social Security Solutions' SSAnalyzer software runs $300 a year.
If you have a financial adviser, that pro may be able to help. But don't count on it.
Nationwide Insurance's survey found that about half the people who work with financial advisers said that person doesn't provide them with advice on how, and when, to file for Social Security benefits.
"I think that the general population of advisers know the minimum they need to know to help their clients" make Social Security decisions, said Krueger. "And then it goes over their heads… Frankly, I feel if you're retirement planning and your adviser is not able to help you get into the weeds of modeling out 'what-if 'scenarios [about Social Security], I'd find a different adviser."
To select one, you might want to look a financial pro who has taken special courses and certification in Social Security. Three national groups now offer such training.
More than 200 advisers have passed the exam from the National Association of Registered Social Security Analysts, or NARSSA, and nearly 2,300 have registered for its courses.
"The closest thing to my heart is being able to help others in my age group to make this [Social Security claiming] decision, because I've seen the huge amount of difference it makes financially, NARSSA co-founder Martha Shedden, who's in her 60s, told "Friends Talk Money."
Shedden said NARSSA advisers typically charge about $400 to $600 for their advice, which is based on Kotlikoff's software computations.
The National Social Security Association (NSSA) — not affiliated with the Social Security Administration — also has a certificate program for advisers. Some 2,500 people have its certificates, said NSSA co-founder Marc Kiner.
Although Social Security rules are complicated, Kiner told "Friends Talk Money," learning them is like picking up a foreign language. "Yeah, it takes time to learn a foreign language, but if you work with it, you'll learn," he said.
NSSA advisers decide how much they'll charge clients, but Kiner said his fee is $545.
The third group is The Corporation for Social Security Claiming Strategies or CSSCS. It has a certification, too.
When It Comes to Claiming, 'Context Matters'
Before hiring an adviser to help you claim Social Security, Kiner said, ask a lot of questions. "What's their fee structure? If they're not charging you anything, they want your assets," he noted. If they're charging a substantial fee, they're more likely to be independent and objective.
One last tip, from Krueger: Look at your Social Security benefits claiming decision holistically — as part of your big financial picture.
"There are certain investment strategies for people that play really well with your specific situation for taking benefits," said Krueger. "Context matters."
With the average Social Security benefit of just over $1,500 a month, making the right choice about when and how to claim Social Security, Kotlikoff said, "can be the difference between a decent retirement and a terrible retirement."