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Case Study on Social Security Switch Strategies


Mr. & Mrs. Jones are both 66 today.  Dick Jones is a max earner and Jane's Full Retirement Age (FRA) benefit is $1,100/month. Dick has been a max earner for the past 35 years, so his FRA is $2,413/month.

Their advisor suggested that Mrs. Jones take her own benefit today and Mr. Jones postpone his benefit until age 70.  Not a bad plan but there are other options.  So this may not be their best option.

There are several switch strategies available to this couple. 1) File and Suspend Strategy. 2) Restricted Application Strategy. 3) File and Suspend with Restricted Application. 4) And if they were 62 and considering this decision, there would be yet another strategy, solo to spousal switch.

If they take their advisors recommendation, they are leaving over $26,000 on the table.

Its important to run the numbers and consider the options by doing the calculations- vary few ever run the numbers on the various strategies.  Can you see how shooting from the hip and guessing could be expensive choice?  There are more variable that can make such a decision much more complex.  Age difference, Life Expectancy difference, earning record difference, Cost of Living Assumptions and discount rate assumptions all make for more complex work.  All of these can and should be run to optimize your benefits.

Some consultants or advisers simply do a break-even analysis and this may work on single but not for married couples.  The difference between the best and worst election can be well over $100,000 in today's dollars! Great case for planning as wise stewardship again.

For married couples there are 81 possible combinations of election years considering whole years only. There are 9 potential election strategies including "switch" options.  Do you think the Social Security Office is going to runs these for you?  Think again.  Even if you asked for all the possible combinations they still would not be allowed to give you advice.  There are some other important considerations such as other assets and their taxable footprint.  Personal health and family history are critical to making good decision as well.

If you have recently elected there is still good news for you.  Form 521 can revoke your choice and allow you a do over in the planning process.  Check out my blog post on Form 521.  This is an option the Social Security Administration now restricts the revoke or change only during the first 12 months after you file. 

If you would like to do some planning on your own and utilize an online calculator to run all of these numbers quickly and easy then utilize this link to Social Security Timing and if you wish not to get help simply click "no thanks" when asked if you want help.  Timing does matter.

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Comment   |  7 years, 6 months ago from Maitland, FL