Understand One's Social Security Benefits

When to take Social Security benefits has become a major topic on the Internet as more people are become eligible.   The major is question is when to take it: Early before full retirement age (FRA); At FRA 66 and 10 months born 1959 or 67 born 1960 or later; or Delayed after FRA but no no later than 70.

This question is already a complex one with factors such as estimated life expectancy, health, other sources of retirement income, and current financial situation that affect.

However, there is one factor that is rarely discussed that may have even more impact, auxiliary benefits for minor dependents, which only a few people qualify for.  If one is taking Social Security payments, one's minor dependents under 18, or until 19 if they are in high school, can receive auxiliary benefits up to 50% of the PIA (primary insurance amount) limited by the maximum family benefit cap.  The auxiliary benefit amount can be significant.  For example, if the PIA is $3200, the auxiliary benefit can be has high as $1600.   In addition, the spouse can receive auxiliary benefits caring for a minor child under 16.

Most people are not aware of possible auxiliary benefits when retiring, but they are definitely as factor when one is considering what age to take start taking Social Security.

For more on Reaping the Rewards, check back every  Friday for a new segment.

This is not financial nor retirement advice. Please consult a professional advisor.

Copyright © 2025 Achievement Catalyst, LLC

Taxes on Social Security Payments Should Be Eliminated

Contributions to Social Security were taxed before being withheld.  Until 1984, Social Security payments were not taxed.  In 1984, 8% of Social Security recipients paid federal income tax on the payments.   The thresholds for Social Security being taxed were set in 1984 and have not been adjusted for inflation. Today, 56% of recipients pay federal income tax on Social Security payments.

Two bills that have been reintroduced to eliminate taxes of Social Security: Senior Citizens Tax Elimination Act (H.R. 1040) and You Earned It, You Keep It Act.

For more on Reaping the Rewards, check back every Friday 

This is not financial, legislative, social security, tax nor retirement advice. Please consult a professional advisor.

Copyright © 2025 Achievement Catalyst, LLC

Social Security COLA and Medicare B Premiums for 2026

For 2026, Social Security payments will increase 2.8% and Medicare Part B premiums will increase to $202.90 from $185.  The higher payment will start in January 2026.

For more details, see It's official. Medicare Part B 2026 premium will eat a big chunk of Social Security COLA

For more on Reaping the Rewards , check back every  Friday  for a new segment.

This is not financial nor retirement advice. Please consult a professional advisor.

Copyright © 2025 Achievement Catalyst, LLC

Regret for Delaying Social Security to 70

"Tomorrow is not guaranteed." ~ old adage

Common thinking is to wait until 70 if one can afford it and is healthy in order to receive a higher Social Security payment.  Mathematically, that seems to be good advice.  However, life happens.

Below is a link to an article in which the person regrets waiting until 70 and his reasons.

I'm Retired And Regret Claiming Social Security At 70 - Here's Why

Here's a summary of the article:

• Hidden Tax Trap. That higher income pushes him into brackets where more of his Social Security gets taxed, and his Medicare premiums get hit with surcharges. He's essentially penalized for following conventional wisdom about waiting until 70.
  
  
• Health Gets Worse. He spent years in my late sixties staying healthy, exercising, and planning for a long retirement. Then at 72, he was diagnosed with a serious condition that limits my mobility and energy. Those extra years between 67 and 70 when he could have truly enjoyed his benefits are gone forever.
  
  
• Breakeven math is just theoretical.  The break-even point for waiting until 70 compared to benefits claimed at age 67 is approximately age 82. But that calculation assumes everything stays constant – your health, Medicare costs, tax brackets, and Social Security's future stability.  Life happens.
  
  
• Missed Experiences. While he was dutifully waiting until 70, his neighbor who claimed at 62 was traveling the world. She's now 67 and has already received five years of checks that someone waiting until 70 hasn't gotten, allowing her to travel and enjoy life.
  
  
• Social Security May Cut Benefits. He delayed for maximum benefits that might not even be guaranteed when potential cuts come in 2033 or 34.
  
  
• Could Have Done Well Investing. With a 4 percent real return, a person has to live to 89, instead of 78, for it to be beneficial to delay benefits from age 67 to 70, yet 77 percent of 67-year-old males and 65 percent of 67-year-old females die before 89.
  
  
• Spousal Benefits Delayed.  His spouse could have been receiving 50% of my full retirement age benefit for three additional years, but instead got nothing while he chased those delayed retirement credits. That's money they'll never get back.
  
  
• Worried More About Market Fluctuations.  During those three years he delayed Social Security, he had to rely more heavily on my 401(k) and other investments for living expenses.
  
  
• Extra Cash Would Have Been Useful.  Between ages 67 and 70, he faced unexpected expenses: home repairs, medical bills, and helping his adult children through financial challenges.
  
  
• Having Money Sooner Is Better.  Looking back, he realize he treated Social Security like a pure investment decision when it should have been a lifestyle choice. If he could do it over again, he'd claim at full retirement age and use those three extra years of benefits to truly enjoy the beginning of his retirement while he was still healthy enough to make the most of it.

I agree with many of his points since I took Social Security early at 64 and avoided experiencing many of reasons for his regret. 

For more on  Reaping the Rewards, check back every Friday  for a new segment.

This is not financial, Social Security, nor investment advice. Please consult a professional advisor.

Copyright © 2025 Achievement Catalyst, LLC

Ending Taxes on Social Security Payments

Social Security payments used to be tax free, until 1984 when up to 50% of Social Security payments were taxable.  The maximum was increased to 85% in the 1991.

Despite campaign promises of ending taxes on Social Security, the recent legislation did not directly end taxes on Social Security payments.

Now Congress is introducing a bill, You Earned It, You Keep It, to eliminate taxes on Social Security payments.  Similar bills have failed in the past. 

For more details see Taxes on Social Security Could Be Eliminated Under New Bill - Newsweek

I hope this bill passes.

For more on New Beginnings, check back every Sunday for a new segment.

This is not financial, tax nor Social Security advice. Please consult a professional advisor.

Copyright © 2025 Achievement Catalyst, LLC

Best Time to Start Taking Social Security

Spoiler alert: It depends. There is no simple right answer.  Below are some factors that may affect the decision.

An important retiree decision is when to start taking Social Security payments, whether early, at full retirement age (FRA), or delayed to maximum age of 70.

Taking it earlier reduces the payment, but one gets payments more years.   Delaying increases the payment, but one will receive payments fewer years.   The choice one makes depends on several factors.

One factor is how much each option pays in total.  It is straightforward to mathematically calculate which payment choice is higher in total, early or delayed.  Taking it early means getting more payments, which requires many years of getting payments at the later starts before breaking even, and after which the later starts will provide more total payments.  I summarized the effect of taking Social Security at 62, 67 and 70 the chart below.    For example, if one starts at 62, the recipient receives a smaller payment than at 67, but it will take until 78 for the total payments starting at 67 to match the total receive at 62.   

	Age Later Start is More
Age to Start	62	67 (FRA)	70
62		78	81
67 (FRA)			82
70

A financial factor to consider is whether you need the Social Security payments to cover expected retirement expenses.   If you have enough other sources of income, it may be appropriate to delay. A benefit of having social security payments is it significantly reduces the amount withdrawn from retirement savings.  Another benefit of delaying is the surviving spouse may receive a higher survivor benefit when the spouse with the higher payment passes away.  

A personal factor is health and personal life expectancy.  If one is in poor health or doesn't expect to live past the breakeven age, take it earlier.  If one is in good health and have a good probability of a life expectancy past the breakeven age, then delay.   Of course, there are no guarantees and unexpected occurrences can change expectations.  I've know people who passed away a year after FRA.   I've also know people who started at 62 and lived to their 90s.

A rare factor is whether they have minor children or a spouse eligible for auxiliary benefits, which are available to children up to 18 (19 if attending school) and a spouse caring for them. While most retirees do not have minor children, some do and this can be a substantial benefit and may push the breakeven age out further.

In my case, I originally was planning to wait until 70, to maximize the survival benefit for my spouse.  I consulted with three financial advisors at our different brokerages and a social security expert.  They evaluated my specific situation and recommended options.  They all had similar recommendations of starting as early as 62.  After reviewing the analyses, I decided to take social security earlier than my FRA, but later than the earliest starting age of 62.

 

At this point, I am satisfied and very happy with the decision I made. Social Security payments cover about 25% of our annual expenses which reduces our dependence on investment results.  I highly recommend consulting with a social security financial planning expert, which many brokerages will provide at no charge.

For more on Strategies and Plans , check back every Monday for a new segment.

This is not financial  nor social security advice. Please consult a professional advisor.

Copyright © 2025 Achievement Catalyst, LLC

Reaping the Rewards in Retirement

We spend decades working and accumulating money for our retirement.   After retiring, we start spending the funds.  How should this be done?

Spoiler alert:   There is no "right" answer.

Here's what may be available:

• Employer retirement plans.    For a few, profit sharing accounts contributed by the employer.  For some, private company pensions.  For many others, retirement accounts such as 401K, 403B and 457. These are now available for withdrawal or to rollover. There may also be an option to convert retirement funds to an annuity or to convert a pension to a lump sum.  Which option to do?
  
  
• Tax advantaged savings plans.  IRAs (both Traditional and Roth), annuities and whole life insurance.  Should these be used before or after taxable savings?
  
  
• Taxable savings accounts.  Investment accounts that hold stocks, bonds, mutual funds and ETFs.  Should these be used before or after tax advantaged savings?
  
  
• Social Security and/or Public Sector Pensions. These are monthly payments to retirees.  While private pensions are usually fixed,   Social Security and public sector pensions have annual COLA adjustments.  The big question is when to start?
  
  
• Health insurance.  Some may have employer sponsored retiree health insurance. Medicare is available to retirees 65 and older.  Otherwise, ACA insurance.  All require premiums be paid by the retiree.  Should one take original Medicare and supplement or sign up for Medicare advantage?

If it looks complicated to navigate, it's because it is.  There is no straight forward answer.  The decisions should be based on each person's own situation.  The only recommendation I have is to talk to different knowledgeable people, who do not gain financially from a decision you make, and weigh the different options.   

For more on  Reaping the Rewards, check back every Friday for a new segment.

This is not financial, saving, nor retirement decision advice. Please consult a professional advisor.

Copyright © 2025 Achievement Catalyst, LLC

End the Tax on Social Security Income

When I was working, I paid a 6.2% tax on my income for Social Security.  Up until 1984, all Social Security income was tax free.  Nowadays, up to 85% of Social Security income is taxable, depending on one's MAGI.

To me, it appears my Social Security Income is taxed twice.  First, when it is deducted, and then when it is paid out. 

That's why I hope the "You Earned It, You Keep It" Act passes in Congress this year.  It would end the taxation of Social Security benefits.

For more on New Beginnings, check back every  Sunday for a new segment.

This is not financial advice. Please consult a professional advisor.

Copyright © 2024 Achievement Catalyst, LLC

Tax Planning to Minimize Tax Liability

I completed my 2021 tax returns and put them in the mail last week.  Now,  I'll be planning our tax strategy for 2022, specifically income and deductions.

As a retiree, I have some ability to influence our yearly income since we have no W-2 wage income.  In the past, our only regular income was rental income, interest and dividend income.   The rental income has been about the same for years.  Interest and dividend income varied.   Two incomes that are able to be manage:  Capital gains income and IRA distribution income can be controlled each year.   By taking more or less Capital Gains or IRA distributions, I can predict what our tax liability was for the year.

In 2022, will have some additional income that we no or less control over.   I started taking Social Security this year.  In addition, my spouse will need take RMDs from an inherited IRA over the next 10 years.  So it will even be more important for us to manage our discretionary income sources in 2022.

My goal is to keep our income in the 12% tax bracket and in the 0% long term capital gains tax bracket. 

My tool for managing our tax liability is Excel.    Each year, I put the forms into Excel spreadsheets and link the numbers as done on the tax forms.  That way, I can make changes and determine the effect on the tax owed.   I find using Excel easier and better than using tax software.   Excel allows me to make changes and see the reasons that cause the changes in our tax liability.   It's easy to run different scenarios.

The only downside is I need to do the update to the tax forms myself.   But that is a small price to pay for the benefit I get.

For more on Strategies and Plans, check back Mondays for a new segment.

This is not financial, investment nor tax advice. Please consult a professional advisor.

Copyright © 2022 Achievement Catalyst, LLC

Potential Changes to Retiree Savings, Pensions and Social Security

Several proposals in Congress may get passed and significantly affect my retirement income.  They are summarized in this article from CNBC and quoted below.

Here are the key points from two of the proposals that affect me:

• Secure Act - "The Secure Act would include a bevy of changes to existing retirement rules. Its main goal: to expand access to retirement savings.
  
  It includes measures to allow small employers to band together to offer 401(k) plans, give part-time workers access to retirement plans, take away the 70½ age limit for individual retirement account contributions and raise the age for required minimum distributions to 72, from 70½.
  
  It also would expand the inclusion of annuities in 401(k) plans and put a 10-year time limit on how long non-spouse beneficiaries can stretch out an inherited IRA."
  
• Social Security 2100 Act -  "The Social Security 2100 Act looks to fix that by extending the solvency of the program into the next century...
  
  The proposal would give those who are or will be receiving benefits a raise that is the equivalent of 2% of the average benefit. It would also set the new minimum benefit at 25% above the poverty line.
  
  The plan also would increase the amount of non-Social Security income one can earn before benefits begin to be taxed. The new limits would go to $50,000 for individuals and $100,000 for couples, up from today’s $25,000 and $32,000 thresholds.
  
  In order to pay for those changes, the bill calls for raising payroll taxes on wages over $400,000. Wages up to $132,900 are currently taxed."
  

In addition, there are a three elements that don't affect me much if at all.

• Rehabilitation for Multiemployer Pension Act - "Many so-called multiemployer pension plans are on the brink of running out of money...The new bill would let pensions borrow money to remain solvent so that they can continue to pay retirees. The legislation would create a Pension Rehabilitation Administration within the Treasury Department and a trust fund from which the loans would be distributed.
  
• Health Savings for Seniors Act - " This bill would allow individuals who are on Medicare to continue to contribute to health savings accounts. Currently, they are prohibited from doing so.
  
• Equal Treatment of Public Servants Act - This bill "would enable public workers to get larger Social Security benefits. A current rule, the Windfall Elimination Provision, reduces their benefits based on how much pension income they receive."

A couple of these have been passed by the House, but not the Senate.  The other three are still being considered by the House.

For more on Reaping the Rewards , check back Saturdays  for a new segment.

This is not financial, or retirement advice. Please consult a professional advisor.

Copyright © 2019 Achievement Catalyst, LLC

Our Social Security Maximization Strategy

Last week, I had a discussion with a Social Security expert and have revised our strategy for when to take Social Security benefits.   Until this call, I was analyzing option on how to maximize our total benefits received based mainly on when I started taking Social Security benefits.   The analysis showed that it was financially superior for me to start taking benefits at 62..

The expert offered a different strategy: Maximize the higher income benefit first and then maximize total benefits received.   Her point was that the higher income benefit would be the ONLY benefit if one of the couple passed away.  Therefore, it would be important to ensure the higher benefit is as close to the maximum as possible.  From her experience, the surviving spouse (often the woman) was shocked when she learned how low the survivor's benefit was because the retirement benefit was started at 62.

However, while waiting to maximize benefits, my spouse can start her Social Security benefits at 62, and thereby enabling us to collect auxiliary benefits due to minor children.  I had not considered this approach prior to consulting with the expert.

So my new strategy is to wait until 70 before starting my retirement benefits.    This will maximize our retirement benefits when one spouse passes away.  In addition, we will plan to have my spouse start her reduced benefits at 62, which will give us some Social Security income prior to me turning 70.

For more on New Beginnings, check back Sundays for a new segment.

This is not financial, retirement or Social Security advice. Please consult a professional advisor.

Copyright © 2017 Achievement Catalyst, LLC

Social Security Options

I'm learning there are many factors to consider on when to start taking Social Security payments.  Unfortunately, there is no right answer since it mostly depends on when the recipient dies, which won't be known in advance.  Here are some of the factors:

Earlier or later.   People can start as early as 62 with reduced benefits or wait until 70-1/2 for higher benefits.  Based on my analysis, 78 is the breakeven age for me.  If I die before 78, going earlier is better.  If I live past 78, starting later is better.   For a surviving spouse, later is always better.

File and suspend.  At full retirement age, a person can choose to file and suspend benefits so that a spouse can get the spousal benefits.

Other family member benefits.  In some cases, minor children are eligible to receive benefits also.

I always thought Social Security would be gone by the time I was eligible for benefits.  But now that I'm getting closer to the minimum age, I'll be doing a more detailed analysis of the options with my financial advisor.
For more on Reaping the Rewards, check back every Friday for a new segment.


This is not financial or retirement advice. Please consult a professional advisor.

Copyright © 2013 Achievement Catalyst, LLC

Social Security - Earlier or Later?

Although I won't be eligible for Social Security for several more years, I've been evaluating whether to take a reduced benefit earlier or a higher benefit later. I've estimated my break even age to be 78, i.e. I will get more money taking benefits at 62 if I die before 78 and more money taking benefits at 70-1/2 if I die after 78.

My base assumption (worry:-) has been to plan financially for living into my nineties since my dad died of pneumonia (special cause) at 79 and my mom died at 85.  I thought living passed 78 was highly likely.  So I was strongly considering waiting until 70-1/2.  For reference, my spouse's perspective was for me to take it at 62 since living to 78 wasn't a sure thing

Recently, a change in my health situation has caused me to rethink my assumption.  I'm estimating that the probability of living passed 78 has become more unlikely.    So I've revised my plan to taking Social Security payments beginning at 62. 

For more on Reaping the Rewards, check back every Friday  for a new segment.

This is not financial or retirement advice. Please consult a professional advisor.

Copyright © 2013 Achievement Catalyst, LLC

Social Security - Earnings Discrepancy Not an Error

In August 2012, I reviewed my Social Security earnings statement and thought I found an error. For one year, my earnings for Social Security and Medicare were not the same, even though I was earning below the maximum earnings threshold for Social Security.   The representative said a form would be sent to me so that I could correct the discrepancy.

Since I still had not received the forms,  I called Social Security back again today.   I explained the discrepancy again and the representative put me on hold to research the issue.  After a few minutes, she returned and asked, "Did you ever work for a government agency that did not participate in Social Security?"  Immediately, I remembered that I worked in a part time job for the county that year, and Social Security was not withheld.

I compliment the representative for solving my issue so quickly and asked if there was a survey I could take.   She transfered me to her supervisor, and I told him that she had done a great job.   Of course, he was pleased to hear a compliment, instead of the more frequent complaint.

For more on Reaping the Rewards, check back every  Friday Saturday Sunday for a new segment.

This is not financial advice. Please consult a professional advisor.

Copyright © 2013 Achievement Catalyst, LLC

Trying to Correct a Social Security Earnings Error

In August 2012, I noticed an error in my earnings report: the amount earning taxed for Social Security and Medicare were different, which is not possiblessince my earnings were below the maximum earnings taxed for Social Security. I thought this would be a simple error to resolve.   NOT!

I called Social Security to explain the disceprancy and expected immediate resolution.   Unfortunately, my expectations were too high.   First, the representative told me that the number were different because Social Security and Medicare were taxed at two dfference rates.  With great self control, I explained that I agreed the rates were different, but the numbers were supposed to be my earnings that were taxed, which should not be affected by different tax rates.  After putting me on hold twice, the representative finally agreed that I was correct.

Second, she told me that the only way to correct the error was to fill out a form that would be sent to me.   It's been at least a month and I'm still waiting for the form.  So I will need to call Social Security again to get the form.

At this point, I still have several years to correct the discrepancy so I don't have a great sense of urgency yet.  Right now, I only have a great sense of disappointment in the ineffectiveness of the Federal government to resolve such a simple verifiable error.

For more on  Reaping the Rewards, check back every Friday for a new segment.
This is not financial or retirement advice. Please consult a professional advisor.

Copyright © 2012 Achievement Catalyst, LLC

Early Retirement Impact on Social Security Benefits

 A reader asked me if retiring early would reduce my social security benefits, since I would not be contributing for many years before starting Social Security payments.   I had done the research before I retired (over five years ago), and determined there would be a minor reduction.  However, before answering the question again, I decided to do some followup research.

First,  the topic was also discussed on the EarlyRetirement.org forum.  The posters concluded there were two factors that impacted whether early retirement reduced Social Security benefits:

1. Years of contribution.   Social Security uses the top 35 years of employment contributions to calculate benefits, no matter how many years are worked.  If working less than 35 years, contributions are counted as zero until year 35 is reached.  In addition estimated benefits are calculated by extrapolating the most recent year until retirement age.
2. Years at maximum contribution.   Each year a maximum level is set for Social Security contributions.  The closer contributions are to the maximum level the closer the benefit is the maximum level.

Social Security also has a benefits calculator  that allows estimating of benefits when taking early retirement. It allows the entry of zero for future year, versus the typical estimator that assumes the last annual income until full retirement. Unfortunately,  it is a little cumbersome to use since it requires manual entry for each year worked.  I used this calculator to estimate the impact of early retirement on my benefits prior to retiring.

Although Social Security doesn't explicitly share, it appears the relationship between the two factors and benefit payout is asymptotic   After a certain number of years and years at maximum, the benefits don't increase much for each additional year.   Similarly, not working the last few years doesn't reduce benefits much.

In my case, I had 31 years (including 4 years of only summer jobs during college) of contributions to Social Security and  half were at the maximum contribution level.  Not working, i.e. making zero contributions for 4 years to get to 35 years, seemed to reduce my benefits around 5% (based on my recollection), versus contributing at the maximum level for another 16 years.   The reduction seemed like a reasonable trade off for retiring early.

Since retiring, I have made contributions for four more years.  There has been a 15% increase in full retirement benefits, because Social Security expects that I will contribute at the same level as 2011 for another 12 years, which I won't be doing.

Based on this analysis, I estimate a maximum reduction of 15% in my Social Security benefits from retiring early versus working until full retirement age.   However, I expect my reduction to be lower since I will be receiving several more years of deferred compensation from which Social Security taxes will be withheld.

For more on  Reaping the Rewards, check back every Friday for a new segment.

This is not financial advice. Please consult a professional advisor.

Copyright © 2012 Achievement Catalyst, LLC

Auxilliary Social Security Benefits

While working at one of my part time jobs, a colleague mentioned to me that Social Security can be paid to minor children of Social Security recipients. This was new information to me and I decided to check with the Social Security administration, since our daughter is only six years old.

Here's what I learned. When I start collecting Social Security payments the following people can also qualify for additional payments from Social Security:

My spouse who earns less than $14,000 and is caring for a child under 16. She can collect 50% of my full retirement benefit.

My daughter until she turns 18 (19 and 2 months while in high school). She can collect 75% of my full retirement benefit.

Total family benefits are limited by the calculated maximum benefit amount.

Due to the auxiliary benefits, it is financially beneficial for me to start my Social Security payments when I'm 62, instead of waiting for full retirement age. Even though my payments will be reduced, the additional auxilliary payments will make the break even point for waiting be several years older.

For more on Reaping the Rewards, check back every Friday for a new segment.

This is not financial or retirement advice. Please consult a professional advisor.

Copyright © 2011 Achievement Catalyst, LLC

Social Security Payback Option is Elminated

Historically, Social Security has allowed beneficiaries to payback previously received benefits interest free and restart payments at a higher benefit level. Originally, the payback option was allowed so as not to penalized beneficiaries who could qualify for a higher benefit. However, as the payback option became more known, many financial advisors realized that the option was effectively an interest free loan and a great hedge to protect higher benefits. Thus, a Social Security recipient could start taking benefits at 62, put the money in the bank, earn interest, return all the payments at 70 and begin receiving the higher monthly benefit. Not only would the beneficiary be guaranteed higher payments the rest of his life, he would also get to keep all the interest earned for 8 hears. Of course, this assumes the beneficiary did not need to spend the money on living expenses.

Effective December 8, 2010, Social Security has eliminated the current payback option. Beneficiaries can no longer payback benefits and restart at higher payments indefinitely. Paybacks must now be initiated with 12 months of starting benefits and can only be done once in a lifetime. In addition, suspending benefits voluntarily can only be done for payments that have not been received, i.e. one cannot suspend benefits earlier and repay payments. The elimination may save Social Security as much as $5.5 billion if every beneficiary with sufficient liquid assets used the payback option.

While I had evaluated the benefits of using the payback option, I am not unhappy Social Security has eliminated the do over. Losing the option will eliminate a retirement benefits scenario and reduce our decision to simply when I start taking benefits and when my wife starts. As I get older, simpler is definitely better :-)

For more on Reaping the Rewards, check back every Friday for a new segment.

This is not financial or retirement advice. Please consult a professional advisor.

Copyright © 2011 Achievement Catalyst, LLC

Maximizing our Social Security Benefits

Although we are still quite a long ways from being eligible for Social Security benefits, I've looking into ways we can maximize our benefits. For our situation, a strategy know as the 62/70 solution appears to be most promising, allowing us to have the proverbial cake and eating it too.

The 62/70 solution is relevant when the the lower paid spouse is younger, by less than eight years, and the older and higher paid spouse is delaying until 70 to receive the maximum Social Security benefits. While the higher paid spouse is waiting, the younger spouse can file for reduced Social Security benefits at 62, which enables the older spouse to collect spousal benefits at full retirement age. (12/13/09 update: Getting spousal benefits isn't likely for the higher paid spouse. I check with Social Security and they said the older spouse would automatically gets the higher of their own or spousal benefits when filing for Social Security payments at full retirement age.) Thus, the couple can collect Social Security payments, while waiting for the higher benefits to take effect at age 70 for the older spouse.

At 70, the older, higher paid spouse can apply for the higher Social Security benefits, and the younger spouse will be eligible spousal benefits at full retirement age. If the spousal benefit is higher than the younger spouse's retirement benefit, the Social Security payment will be increased to the level of the spousal benefit.

The benefit of the 62/70 solution is two fold:

1. The couple can collect some benefits while waiting for the older spouse to reach 70 and maximize the Social Security payment. Otherwise, the couple receives no payments while waiting for age 70.
   
2. When one spouse dies, the surviving spouse will continue to collect the maximum Social Security payment of the higher paid spouse.

My understanding of the 62/70 solution seems almost too good to be true. Therefore, I plan to confirm my understanding with our financial planner, and the Social Security administration before proceeding with this approach as a firm plan.

For more on Reaping the Rewards, check back every Friday for a new segment.

This is not financial, retirement or Social Security advice. Please consult a professional advisor.

Copyright © 2009 Achievement Catalyst, LLC

Time to Invest Social Security in Stocks?

In Creative fixes for US finances Jim Jubak offers that now might be a good time for the U.S. government to put some Social Security funds into the stock market. Here are the reasons for considering this move:

Buy low and sell high. Investing Social Security funds seemed to be a good idea during the bull market and near the peak. From a contrarian view, now would a great time to put Social Security money into the stock market.

Bailout retirement savings account holders. The U.S. government is bailing out banks, insurance companies and investment banks. Others, such as the auto companies, have requested money. Why not use some of the bailout money to directly help the taxpayer. Injecting Social Security funds directly into the stock market may help end the bear market, which has reduced retirement account values by over $2 trillion.

Overall, I think this is a reasonable idea to consider for a portion of Social Security funds. Doing so would offer two immediate benefits: 1) Show confidence in the U.S. economy and 2) Injects funds to replace money that has been withdrawn from stocks over the past few months It may even make Social Security solvent for the longer term, which would help everybody.

For more on Reflections and Musings, check back every Saturday for a new segment.

This is not financial or investment advice. Please consult a professional advisor.

Copyright © 2008 Achievement Catalyst, LLC