Why Social Security Decisions Are So Tough

If you’re facing the decision of when to file for your Social Security benefit, you’ve probably noticed just how confusing it can all be. There are so many decision-points in the system, it’s no wonder folks are confused.  Depending on your point of view and how you count the decision-points, each person facing this decision has thousands of possible combinations to consider as they decide when to pull the trigger and file for benefits.

Recently I was going over a decision tree that I had built to describe the decision-making process for filing, and within this review I have counted that for a single, there are 14 decision-points and a total of 96 months in which a filing decision can be made, for a total of 1,344 combinations.

  If the single person chooses the option to file and suspend benefits to protect a filing date, this adds an additional 36 to 48 months of decision-points.   Add a spouse to the mix, and the decision-points increase to 21 for each spouse, with up to 96 months of filing options, for a total of more than 4,000 decision-points for a couple.   If you’ve been married previously and are now single (due to divorce or death of your spouse or ex-spouse), add more complexity. Exponentially more complexity ensues if you were married at least 10 years to more than one ex-spouse. When you consider that a decision made in haste could mean a difference of up to $100,000 or more over your lifetime, as well as how many possible decision-points there are, it doesn’t surprise me at all that I’ve been hearing from a lot of folks lately. Post originally appeared as Why Social Security Decisions Are So Tough on Getting Your Financial Ducks In A Row The post Why Social Security Decisions Are So Tough appeared first on Getting Your Financial Ducks In A Row.

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Jim Blankenship, CFP®, EA

Jim Blankenship is the founder and principal of Blankenship Financial Planning, Ltd., a financial planning firm providing hourly, as-needed financial planning and advice. A financial services professional for over 25 years, Jim is a CFP professional and has earned the Enrolled Agent designation, a designation that qualifies him as enrolled to practice before the IRS. Jim is also a NAPFA-registered financial advisor, which designates him as a Fee-Only Financial Advisor.

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  • I am 60 and plan to take SS at FRA at 66, 6m. My wife is 58. My ss benefits are vastly better that hers. Does it make sense for her to take her ss at age 62, and then when I am FRA she could convert to the spousal benefit when I start taking my ss? Her age 62 benefit is $701, while the spousal benefit would be $1301. Does she have to wait until she is at her FRA to get the most of a spousal benefit?

    • This is a very complicated question. Briefly, if your wife starts her benefit at age 62 she will never be eligible for the full 50% spousal benefit, due to the reduction from taking her own benefit early. The only way for her to get the full 50% spousal benefit is for her to delay filing for any benefit until she reaches her Full Retirement Age.

      Now, that doesn’t mean it wouldn’t make sense for her to file for her own benefit at age 62. That’s a decision you’ll need to make by looking at what the reduction is and how that plays into your overall strategy.

      Additionally, if she has filed for her own benefit when you file for your benefit, she will automatically start receiving the spousal benefit as of that date, even though she’s not at her Full Retirement Age – due to the Deemed Filing provision. This would result in an additional decrease to her spousal benefit.

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