Article from Journal of Accountancy:
http://www.aicpa.org/pubs/jofa/jul2006/garnett.htm
A video presentation by Jonathan Clements of the Wall Street Journal:
http://www.blogmyway.org/entry.php?w=andy&e_id=11525
Jonathan's home page:
http://www.jonathanclements.com/links.html
And here is another article from the Wall Street Journal with an excerpt below:
http://online.wsj.com/public/article_print/SB119514459625294332.html
The most frequently asked question about Social Security in financial advisers' offices
"When should I file for benefits?" Invariably, that's the question planners hear first.
When it comes to the answer, the conventional wisdom is changing. Where many advisers once recommended grabbing benefits at age 62 (at which point your monthly check is reduced permanently by as much as 25%), experts today say extended life spans and the demise of traditional pensions argue for waiting until your full retirement age, or later, to collect a paycheck. (You get your largest possible benefit at 70.)
Even "foolproof" strategies are no longer looked upon as foolproof. "Let's say your doctor tells you that you have six months to live," says Bruce Schobel, a New York actuary who worked in the Social Security Administration in the 1980s. "So, it's obvious: You take benefits at 62, right?" Maybe not. Because of Social Security rules involving spousal benefits, Mr. Schobel says, "taking a reduced benefit at 62 could serve as a cap on the surviving spouse's payout, reducing that person's future benefits by tens of thousands of dollars."
"So even an apparently simple decision becomes complicated," he says.
Calculators, of course, can help. (We discuss some of the better ones below.) But first, take a few minutes to read a new report: "Rethinking Social Security Claiming in a 401(k) World," written by James Mahaney and Peter Carlson, retirement specialists at Prudential Financial Inc. It's the best discussion we've seen about filing for benefits and possible strategies for doing so. (Note to the give-me-my-money-at-62 crowd: The authors conclude that changes in Social Security in recent years "make the value of delaying the receipt of...benefits greater than in the past.")
The report, published in August, can be found at the Pension Research Council, part of the Wharton School at the University of Pennsylvania. (Go to pensionresearchcouncil.org9 and click on "Working Papers" and 2007. Registration is free.)
Coolest strategies you've never heard of for claiming benefits
One way many couples can maximize Social Security benefits over their lifetimes is for wives to claim benefits at age 62, and for husbands to delay filing until almost 70, says Alicia Munnell, director of the Center for Retirement Research at Boston College. (That's based on a number of factors, including income levels, life spans and survivor benefits.) You can find Dr. Munnell's research in the June issue of the Journal of Financial Planning. (See fpanet.org/journal10 and click on "Past Issues and Articles.")
Of course, 70 is a long time to wait for Social Security. So, here's a way -- courtesy of Steve Potter, a retired public-affairs specialist at Social Security -- to avoid the wait and still get a sizable benefit at age 70.
The scenario: George, at his full retirement age of 66, expects a benefit of $2,000 a month. His wife, Martha, at her full retirement age of 66, expects a benefit of $1,000 a month.
The strategy: Martha files for a reduced benefit on her own at age 63, or $800 a month. George, at age 66, files for just a spousal benefit, based on Martha's earnings. He would get $500 a month as Martha's spouse. (Yes, Social Security allows George to get half of what Martha was projected to receive at her full retirement age.) Then, at age 70, George applies for benefits based on his earnings history. With the "delayed retirement credit" (the additional dollars one receives for waiting until age 70 to claim Social Security), George's benefit would be 32% higher, or $2,640 a month.
Social Security would stop George's spousal benefit of $500 a month because he's entitled to the $2,640, based on his own earnings, at age 70. Again, for this to work, George must wait until his full retirement age or later to file for a spousal benefit.
The nice part about this strategy is that George -- if he's trying to maximize his and Martha's combined benefits -- doesn't have to wait three or four years beyond his full retirement age for a paycheck; he can start collecting benefits at 66 based on Martha's earnings history -- and jump to a considerably bigger benefit at age 70. As far as the "break-even" point goes -- the age at which the accumulated value of benefits from this strategy will start to exceed the accumulated value from both spouses filing for full benefits at age 66 -- it's 79. Beyond that age, the 63-66 strategy yields a larger total return. (This example assumes George and Martha are the same age.)
Note: Some Social Security representatives we spoke with weren't aware of this strategy. If you try this at your local Social Security office -- and if the staff balks -- ask them to confirm the strategy with Social Security headquarters in Baltimore, which confirmed it for us.
Best calculators and sources of information
Start with the Social Security Administration and its Web site, ssa.gov.
The calculators alone are worth the visit. Three benefits calculators -- "Quick," "Online" and "Detailed" -- estimate payouts using different retirement dates and levels of future earnings. (Click on "Calculate your benefits" on the home page.)
In addition, an "Earnings Limit" calculator illustrates how a salary -- if you file for benefits before full retirement age and are still working -- might affect your monthly check from Uncle Sam. A "Retirement Age" calculator shows how retiring early reduces your monthly payout (as a wage earner or spouse). And a "Break-Even" calculator shows the age at which the accumulated value of higher benefits -- for a person who claims Social Security, say, at age 66 -- will start to exceed the accumulated value of lower benefits for a person who opts for Social Security, say, at age 62.
The site also provides extensive lists of frequently asked questions in 24 categories; offers access to dozens of forms and publications; and, perhaps most important, allows you to perform a number of tasks online -- including filing for benefits (and, thus, avoiding a trip to the Social Security office). In all, a very valuable tool.
Another useful resource is analyzenow.com, a Web site devoted to retirement issues. Started by Henry K. "Bud" Hebeler, a retired aerospace executive and author of two books about retirement planning, analyzenow features a number of helpful articles about Social Security and two calculators that can help users determine the best age to file for benefits.
Two other online resources: The National Committee to Protect Social Security and Medicare, a Washington advocacy group, has a spot on its Web site called "Ask Mary Jane" (www.ncpssm.org/maryjane). There, you can email a question to Mary Jane Yarrington, a congressional caseworker who joined the group in 1986 as a senior policy analyst. (Before you write, check the archives for earlier questions and answers.)
Second, Stanley A. Tomkiel III, a New York lawyer, is the author of the "Social Security Benefits Handbook" -- the contents of which are available free at socialsecuritybenefitshandbook.com.
Finally, if you prefer print, Mr. Matthews, the San Francisco lawyer, is co-author of "Social Security, Medicare and Government Pensions," one of the best general guides to the program.
