Forbes: 44 "secrets" about Social Security

[bizlady]

I found this article earlier today, and though I thought I was fairly well informed on social security- there were some surprises. And some "rules" that I am not sure I even followed what was being stated.

Nonetheless, I think it is a good read: 44 Social Security 'Secrets' All Baby Boomers and Millions of Current Recipients Need to Know - Revised! - Forbes

 

[Midpack]

Great list, I am sure it will be helpful to many members, thanks.

Now if I could just figure out the best strategy to deal with #17 which I've struggled with for a couple years...

 

[pb4uski]

Definitely one to bookmark although I admit my eyes start to glaze ove after a couple pages.

 

[Hermit]

#16 says I should have taken survivor's benefits at 60 instead of waiting until I retired at 63. I guess I left a few bucks on the table. I had never seen that area clarified. There seemed to be a hint when I went in to the SSA that I should file for those benefits. I said I would not pass the earnings test and they just kind of shrugged their shoulders.

 

[samclem]

This is a good list to keep handy. Obviously it's a plug for the SS optimization program, but I gotta say I'm inclined to pay for it after reading this list.

Some of the big gotchas that I hadn't considered:

17. When it comes to possibly paying federal income taxes on your Social Security benefits, withdrawals from Roth IRAs aren’t counted, but withdrawals from 401(k), 403(b), regular IRAs, and other tax-deferred accounts are. So there may be a significant advantage in a) withdrawing from your tax-deferred accounts after you retire, but before you start collecting Social Security, b) using up your tax-deferred accounts before you withdraw from your Roth accounts, and c) converting your tax-deferred accounts to Roth IRA holdings after or even before you retire, but before you start collecting Social Security.

and:

29. If you choose to file and suspend in order to enable your spouse to collect a spousal benefit on your earnings record while you delay taking your benefit in order to collect a higher one later, make sure you pay your Medicare Part B premiums out of your own pocket (i.e., you need to send Social Security a check each month). If you don’t, Social Security will pay it for you and treat you as waving (i.e., not suspending) your benefit apart from the premium and, get this, you won’t get the Delayed Retirement Credit applied to your benefit.

and:

33. The thresholds beyond which first 50 percent and then 85 percent of your Social Security benefits are subject to federal income taxation are explicitly NOT indexed for inflation. Hence, eventually all Social Security recipients will be tax on 85 percent of their Social Security benefits.

 

[WhoDaresWins]

Thanks for posting, bizlady! This is very timely for me. I plan to retire this July when I turn 60. I have been turning over in my head the need to possibly schedule an in-person interview at SS sometime soon to discuss SS survivor benefits. I had been thinking of just taking them at age 60 and letting my own benefits grow until age 70. I will get a COLA'ed pension and also have non-qualified investments that throw off considerable interest and dividends. I am not sure how that will impact any benefits. Maybe I will fork out the $40 bucks for the SS calculator.

 

[Chuckanut]

This is quite a list and thankfully, at least 50% does not apply to me. Understanding it all takes some time. I wish he had chosen to include some examples with numbers. I find numbers make things easier to understand.

Numbers ain't hard.

 

[Hermit]

Thanks for posting, bizlady! This is very timely for me. I plan to retire this July when I turn 60. I have been turning over in my head the need to possibly schedule an in-person interview at SS sometime soon to discuss SS survivor benefits. I had been thinking of just taking them at age 60 and letting my own benefits grow until age 70. I will get a COLA'ed pension and also have non-qualified investments that throw off considerable interest and dividends. I am not sure how that will impact any benefits. Maybe I will fork out the $40 bucks for the SS calculator.

I will receive benefits on my wife's account until I file for my own at 70. If I had known about that site and spent the $40 I would have done a little better. This whole thing is different for each individual.

 

[Mulligan]

23. Based on the Government Pension Offset provision, if you receive a pension from a federal, state or local government based on work where you did not pay Social Security taxes, your Social Security spouse’s or widow’s or widower’s benefits may be reduced. But the Government Pension Offset doesn’t kick in until you start collecting your non-covered pension. So, … it may behove you to wait to take your non-covered pension especially if the pension you can collect at a later date is actuarially increased.

Question: I have a non social security pension and am currently drawing it. If I married a lady who has full SS coming to her, does this mean she will draw less SS from her own SS because of the GPO?

Question number 2. My GF was previously married for over 10 years. Can she draw spousal benefits at full retirement age and then draw on her own larger one at 70 with no reduction in her own personal SS? It seemed like in one of the "secrets" in the article that a person could do that.




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[WhoDaresWins]

I will retire from a state government entity but I have paid into SS with every job I ever had...corporate, county govt., federal govt., state university system and this last job. The same is true for my LH. I don't know the amount I would get with survivor benefits but they have to be better than mine given my very moderate final salary and also the fact that I did not work outside the home for 12 years after my son was born. It might even be that his would still be higher than mine when I turn 70. I guess I should bite the bullet, assemble my supporting documents, and schedule an in person appointment.

 

[Hermit]

I will retire from a state government entity but I have paid into SS with every job I ever had...corporate, county govt., federal govt., state university system and this last job. The same is true for my LH. I don't know the amount I would get with survivor benefits but they have to be better than mine given my very moderate final salary and also the fact that I did not work outside the home for 12 years after my son was born. It might even be that his would still be higher than mine when I turn 70. I guess I should bite the bullet, assemble my supporting documents, and schedule an in person appointment.

From the article, you might want to spend the $40 and get a reading from the web site. It would be nice if someone that has used the web site could chime in. I don't know anything about it except for the article and that was rather self serving, but I don't think I got all the answers from SS either.

 

[Sue J]

23.

Question: I have a non social security pension and am currently drawing it. If I married a lady who has full SS coming to her, does this mean she will draw less SS from her own SS because of the GPO?

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My understanding of GPO is that it only affects you, the pension recipient. So the answer to your first question is, No, her SS will not be less if you marry her.

If you marry her YOUR spousal benefit based on her SS will be smaller. The reduction is based on 2/3 of your pension....I think.

 

[BBQ-Nut]

Definitely one to bookmark although I admit my eyes start to glaze ove after a couple pages.

This....

Bottom line - the site was peddling a product that 'within seconds' could be worth the coin to just give an answer.

Too good to be true

 

[samclem]

Bottom line - the site was peddling a product that 'within seconds' could be worth the coin to just give an answer.

Too good to be true

I don't know if the product is worth it, but it seems likely. It seems like a very good situation for a well-written application: highly individual situations applied to a complex set of intertwined rules. Just like taxes: I'm happy to pay for software that hacks through it all and does the math/comparisons.

 

[BBQ-Nut]

Well - I'll be watching this thread to see if any members here actually use the software and what they thought of it.

 

[springnr]

I have gleaned a bunch of good info off the - About.com Money Over 55 page.

The SS calc page:
Social Security Calculators - Don't Claim without Trying One First

 

[Ready]

I have seen other web sites recommend the maximization software in this article, but I do not know anyone who has done it so far. It would be very interesting to see the results if some members decide to try it out. I suspect it works pretty well.

 

[Zorba]

The author of this Forbes article, Larry Kotlikoff, makes a regular appearance on the web at PBS. Google "Larry PBS social security". He also answers questions by people on their specific circumstances.

 

[Dreamer]

23. Based on the Government Pension Offset provision, if you receive a pension from a federal, state or local government based on work where you did not pay Social Security taxes, your Social Security spouse’s or widow’s or widower’s benefits may be reduced. But the Government Pension Offset doesn’t kick in until you start collecting your non-covered pension. So, … it may behove you to wait to take your non-covered pension especially if the pension you can collect at a later date is actuarially increased.

Question: I have a non social security pension and am currently drawing it. If I married a lady who has full SS coming to her, does this mean she will draw less SS from her own SS because of the GPO?

Question number 2. My GF was previously married for over 10 years. Can she draw spousal benefits at full retirement age and then draw on her own larger one at 70 with no reduction in her own personal SS? It seemed like in one of the "secrets" in the article that a person could do that.




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Question #1 is no. Question #2 is yes if her ex-spouse is retirement age and he is either receiving social security or they have been divorced for 2 years.

 

[springnr]

Question #1 is no. Question #2 is yes if her ex-spouse is retirement age and he is either receiving social security or they have been divorced for 2 years.

Question #2 scenario has been clear as mud for me too.

I meet the 10 years / more than 2 years divorced etc., and I'm the high earner in this case.
From reading - for a married couple the high earner can not claim spousal benefits at full retirement age and then draw on their own at 70.

Is this one of those Social Security quirks where as a divorcee one gets a break and the high earner is able to claim spousal benefits at full retirement age and then draw on their own at 70?

 

[growing_older]

15. Millions of Baby Boomers can significantly raise their retirement benefits by continuing to work in their sixties. This may also significantly raise the spousal, child, and mother and father benefits their relatives collect.

I wish there was more explanation of this one. Is this just because their earnings record improves, or is it because of the way age 60 is taken as the wage base against which past earnings are computed to account for inflation, thus making earnings after age 60 push your total earnings up? Or is it because there are still a few years in the calculation before the wage cap was indexed for inflation, so these years replace those artificially limited earlier years? Os something else?

 

[marko]

I found the "start/stop/start" provision (#2) to be interesting until I did the math (always a dangerous thing for me!).

What my numbers show is that if I suspend at 66 and resume at 70, I'd get more money but I'd have to live to be 83 to break even...once again actuarially neutral, I think.

So, applying at 62 and suspending at 66 would make sense if, in those four years you realize that you'll likely live well beyond 83. YMMV.

 

[samclem]

So, applying at 62 and suspending at 66 would make sense if, in those four years you realize that you'll likely live well beyond 83. YMMV.

Yes, but it's not just about the raw number of dollars each option is likely to produce. The inflation-adjusted, non-market-linked, can't-outlive-it nature of the income stream makes SS a very important tool for reducing longevity risk. That tool is a bit more potent if SS is delayed to age 70.

 

[marko]

Yes, but it's not just about the raw number of dollars each option is likely to produce. The inflation-adjusted, non-market-linked, can't-outlive-it nature of the income stream makes SS a very important tool for reducing longevity risk. That tool is a bit more potent if SS is delayed to age 70.

Ok, got that. But what if your only other option is to withdraw that same amount each year from your IRA/401k as you wait to age 70? (I'm ignoring spousal/survivor benefits)

If you keep that $ in your IRA, you could be earning more than the 8% that SS is pegged at (hopefully) and in many cases, you're not paying the full tax load in fed/state income tax as you would with an IRA withdrawal.

 

[imoldernu]

For those who will be using the SS website for info, I will pray for you.