The Torah states in Parshat Acharei Mot, “You shall observe My laws and My decrees, so that you shall live by them.” By emphasizing that “you shall live by them,” we infer that you shall not die by them. Therefore, if faced with a life-threatening situation, a Jew must violate a commandment rather than risk his life. However, there are exceptions for the three cardinal sins—murder, forbidden relations and worship of other gods, for which one is required to give his life rather than commit a transgression.
Although obviously of much lesser import, there are also some cardinal mistakes that people should never make with regard to social security benefits and the various strategies utilized in applying for them. Some of the most important are summarized below:
Both husband and wife are over age 66 and no one is collecting. This may be the biggest and most costly mistake of all. Social security provides spousal and survivor benefits, which should be used to the fullest extent permitted. Although often it is better to wait until age 70 to apply for benefits (see next paragraph), under current law one of the spouses can receive half of the other spouse’s benefit between ages 66 and 70, without affecting at all the benefit to be received beginning at age 70. Failure to apply for this spousal benefit could cost you as much as $60,000 to $80,000 during that four-year period. The Bipartisan Budget Act of 2015 (signed into law last November) significantly restricts the ability to do so for future retirees, but there are two grandfathers—one for anyone over age 66 who suspends his or her benefit by April 29, 2016, and another for those over the age of 62 by the end of 2015. Under the first grandfather, action must be taken by April of this year, so find out if it affects you and don’t delay if you are eligible!
Taking benefits too early. Social security benefits are 76 percent higher if taken at age 70, compared to the amount payable if begun at age 62. A majority of social security recipients take their benefits early (i.e., before full retirement age of 66). In most cases, this is inadvisable, and results in less of a total lifetime payout than would have resulted from waiting. There are many convincing reasons for delaying commencement of benefits; see the articles on my website for a full explanation of the rationale.
Failing to coordinate benefits with the spouse. Social security provides valuable spousal and survivor benefits. These generally result in a husband and wife being able to receive more in total lifetime benefits than they would had they been two single individuals. But a strategy and coordination is required to maximize benefits for a married couple, and the rules are complicated. So, be sure to research these rules and strategies, or consult with an expert in order to maximize your combined benefits.
Lack of awareness about available benefits. Did you know that a wife who never worked a day in her life is still eligible to receive a 50 percent spousal benefit? Did you know that survivor benefits are paid to a widow or widower, no matter how long ago the spouse died? Or that these benefits are lost if the survivor remarries before the age of 60? Did you know that a divorcee can claim spousal benefits on the ex-spouse after they both attain age 62, even without the knowledge of the ex? Or that all divorcee benefits are lost once you re-marry (at any age)? Did you know that a disability benefit automatically converts to a retirement benefit under social security at full retirement age, and that this can have significant implications on total lifetime benefits? Or that a married couple who both have maximum earnings and are both just turning age 64 can receive $120,000 more in total lifetime benefits by divorcing now and remarrying at age 70 (not that I am advocating this)?
There are more than 2,700 rules under social security, many of them obscure and little known. The system is further complicated by the recent Bipartisan Budget Act of 2015, which eliminated some of the best strategies for married couples not meeting either of the grandfathers mentioned above. Don’t commit one of the cardinal sins enumerated above. Feel free to call me to discuss your particular situation, and make sure you get all the benefits you are entitled to.
By Michael Karlin
Michael Karlin is a fellow of the Society of Actuaries, with over 35 years of experience as a pension consultant to large organizations. He now assists individuals in maximizing their pension and social security lifetime payouts, and also speaks on the subject. You can visit Mr. Karlin’s website ssmaximize.com, or reach him by phone at 201-836-6408 or 201-741-7774, or by email at [email protected].
