As I mentioned earlier, determining how best to maximize Social Security benefits is a tremendously complex issue. The relative life expectancies of each member of the couple are but one of the factors that must be considered. For our purposes, let’s consider this couple:
- John: age 60, Full Retirement Age (FRA) 66, life expectancy 80
- Jane: age 58, FRA 66, life expectancy 95
John and Jane decide not to meet with a retirement expert who can help them maximize their Social Security benefits. They instead assume that they’ll receive just as much if they both claim their benefits at age 62.
Using this approach, John and Jane would be able to collect the following benefits:
Not bad, you say? Read on.
Let’s consider the same couple, using a more strategic approach that I provide my clients so that they can maximize their Social Security benefits.
In this case, there are 30,332 different scenarios to determine the one producing the highest value for John and Jane’s lifetime benefits given their situation and life expectancies.
- John should take spousal benefits in June of 2018, at age 66.
- John should take retirement benefits in June of 2022, at age 70.
- Jane should take spousal benefits in June of 2022, at age 68.
- Jane should take retirement benefits in June of 2018, at age 64.
John and Jane’s total benefits are increased by more than 30% over their lifetime:
- Lifetime benefits using strategy 1: $985,071.
- Lifetime benefits using strategy 2: $1,285,886.
Using maximized strategy 2, benefits increase by $300,815.
NOTE: All amounts are in today’s dollars. Lifetime benefits are calculated as the present value of all future benefits assuming you live through your maximum age of life. Discounting is non-actuarial and is based on the real rate of return implied by your assumed nominal rate of return and inflation rate.
In other words, John and Jane left $300,815 on the table, recognizing that the “couple” scenario is by far the most complex with numerous variable and possible outcomes that need to be carefully examined.
For example, what if there were 10 years difference in the ages of John and Jane? What if family history suggests that John would not live to age 69? What if they adopted a 10-year-old grandchild? That’s right, their choices, and the numbers, would all change. But given my understanding of the benefit implications and my access to powerful tools, I am able to help John and Jane find the best strategy available for their specific situation.
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