Many retirees don't maximize their Social Security retirement benefits because they start them at the wrong time or overlook more sophisticated claiming strategies. Those can be costly mistakes, according to a growing body of research.
A couple that is strategic about when and how it files can boost its lifelong benefits by as much as $100,000 compared with what the spouses would get if both simply took benefits at 62, according to a March 2014 Journal of Financial Planning article by John Shoven from Stanford University and Sita Nataraj Slavov from the American Enterprise Institute.
Advisers willing to learn Social Security planning's finer points can provide a service to clients or even win new ones when they may want them - just before they retire.
Jen Lake with Balasa Dinverno Foltz LLC in Itasca, Illinois started "deep diving" into claiming strategies several years ago. She studied the Social Security Administration's website and attended presentations at advisers' conferences. Then she developed strategies to guide her firm's advisers.
The service isn't a game-changer for wealthy clients, she says, but clients like it. It also fits well with the firm's target market of women transitioning through divorce or widowhood because Social Security has unique rules for those situations.
NUANCED CALCULATIONS
Optimizing the claiming decision is tricky, especially for married couples. You have to consider two benefit accounts and spousal and survivor benefits, and make assumptions about the partners' life expectancies.
You have to weigh complex claiming strategies involving early and late filing, spousal benefits and more. For example, with the "file-and-suspend" strategy, the higher-earning spouse files after reaching full retirement age — 66 for those born between 1943 and 1954.
That allows the younger spouse to collect a spousal benefit, assuming he or she is at least 66. The older spouse then suspends his or her benefit until a later date, which lets it grow by about 8 percent each year. The younger spouse's worker benefit continues to increase and, if it becomes larger than the spousal benefit, he or she can switch to that payment.
Several organizations offer structured training. The American College for Financial Services in Bryn Mawr, Pennsylvania, covers claiming strategies extensively in its Retirement Income Certified Planner® course. Sharonville, Ohio-based Premier Social Security Consulting LLC has developed a National Social Security Advisor Certification.
class="mandelbrot_refrag">Software can help. Lake uses Social Security Analyzer as a decision aid; other sources reported using Social Security Explorer and Social Security Maximizer.
Outsourcing is another option.
Jim Pavletich, a 37-year Social Security Administration veteran, started a benefits-planning practice with his wife, Jan, after he left the agency in 2010. Their firm, Social Security Consultants in Chandler, Arizona, advises retirees and advisers on claiming strategies. class="mandelbrot_refrag">Business is going so well the couple is considering raising their consulting rate of $150 an hour for advisers and cutting back on new cases, he said.
(This story corrects last name to Shoven from Slowers in paragraph 2 and age to 66 from 62 in paragraph 8)
(Editing by Linda Stern, Paul Simao and Eric Walsh)