social security benefitsAs millions of baby boomers are in or close to retirement, we should know more about social security benefits than we do. In one national survey, over 70 percent said that they knew the basics of the program, but less than 30 percent actually did. I was glad to have a continuing education course yesterday that reminded me of the best ways to help yourself in the long term.

The decision to start receiving benefits at ages 62 or 63 will prove to be an error for most of us. Most people that draw early choose one of those two ages. The benefit reduction from Full Retirement Age (FRA) is 25 percent at 62 and 20 percent at 63, and of course, the reduction is permanent. Every year that you delay collecting will earn 8 percent for you guaranteed. I don’t know of any other guaranteed rate of return like that now.

Why do many start the benefit early? Certainly, some people need the money early due to unemployment or other reasons. If you are disabled, your disability benefit should be higher than the retirement benefit until you reach FRA. But surveys indicate that the most common reason is a belief that the system will run out of money soon. At this time, that date is still likely about 20 years away.

But consider this. The lower earning spouse can begin collecting on his or her own earnings at 62 or 63, being lower than the spousal benefit to be received later. Then when that spouse hits FRA, usually now age 66, she can add the extra amount to reach the higher spousal benefit between 66 and the time the higher earning spouse dies. If she lives longer than the husband, then she will begin receiving his much higher monthly benefit.

Let’s look at an example. I am not being chauvinistic, but most of the time, husbands have a higher Primary Insured Amount (PIA). Suppose John has a PIA of $2,200, so the spousal benefit is $1,100. (If the wife was an educator under a different pension system, then the rules are completely different.) If Jane begins taking $500 at age 62 from her own PIA, then at FRA, she can add $600 from his account. At John’s later death, she moves up to $2,200 that he was receiving or to which he was entitled.

What if John will work until 70 and Jane waits until age 67 or later to bump up with the spousal benefit? She still will receive only $1,100 per month so there is no advantage to waiting to collect after 66 or FRA.

If you do have plenty of other assets including IRA or other qualified retirement plan money, you may actually reduce your total income taxes paid in the long run by taking post-age 59 ½ distributions from those assets sooner since you will have Required Minimum Distributions at age 70 ½ whether you want them or not.

Financial life, like all aspects of our lives today, has so much flexibility. The government website is and is helpful. But even if you think you know social security and how to plan for your retirement, getting professional help or at least a second opinion can save or make you thousands of dollars. Most of us will live much longer than we expect so these issues can be critically important.

(Past performance is no guarantee of future results. Advice is intended to be general in nature.)