It was October 15, 2007 and the cameras were rolling. At a media event hosted by the Social Security Administration, Kathleen Casey-Kirschling applied online for her retirement benefits. Born January 1, 1946 at 12:01 a.m., she was officially America’s first Baby Boomer to file for Social Security.
Casey-Kirschling merrily pointed and clicked her way through the online application, saying: “It’s so easy! You can do this from home.”
And so launched the “silver tsunami” of retiring Baby Boomers filing for benefits at a clip of more than 10,000 per day for the next two decades.
Ask me, or any other CFP® professional, what we may have thought about this momentous occasion, and you would have probably heard a loud groan. The unintended message sent to the Baby Boomer generation by this short media clip was not a very good one.
First of all, Ms. Casey-Kirschling was 62 years old. Yes, this is the age Americans with a sufficient work history become eligible for retirement benefits from Social Security. But was Kathleen aware of how much she was forfeiting in benefits by not waiting until she reached her full retirement age (FRA) of 66? The answer is approximately 30 percent. And if she had waited an additional four years till age 70, her benefit would be 62 percent higher than what she got at age 62.
Next, as her hyphenated last name suggests, Kathleen was married. That fact alone opens up all sorts of possibilities for coordinating her claim with her spouse, to give her more in benefits than what she would receive based solely on her own work record. Figuring out which spousal claiming strategy makes the most financial sense is anything but something you can easily do in a few minutes from home. It takes some real analysis, yet it can lead to upwards of tens of thousands of additional dollars over retirement.
In all fairness, Ms. Casey-Kirschling may have been completely aware of what resulted in a penalty for taking benefits before full retirement age, and perhaps had done her homework on how she could coordinate her benefits with her husband’s. The reality, however, is that most Americans do not know that there are smart and not-so-smart ways to take Social Security. Too many believe that it’s best to take the money at the first opportunity and run.
How I wish I could have added 20 more seconds to that 2007 Social Security media clip with a consumer-friendly message of my own. Here’s what I would say:
- Think twice before claiming at age 62. Make sure you have done some financial planning to account for your health, family longevity and other resources before automatically signing up the minute you are eligible.
- If you are married, be aware that for married couples there are multiple strategies to increase combined benefits. These may include suspending benefits or filing a restricted claim to spousal benefits. The “best” strategy depends on the difference between the spouses’ ages and the amount each spouse would collect on his or her own record, as well as the couple’s basic financial and health circumstances.
- If you are single and divorced but were once married for over 10 years, you still have the opportunity to make a claim based on your former spouse’s record.
- If you are widowed, widowed and remarried after age 60, disabled, and/or have a disabled spouse, there are even more possible strategies for claiming benefits.
Bottom line: Before you point and click to get your Social Security retirement benefits, spend some time getting good advice about your options. Be aware that the Social Security Administration, while extremely helpful, efficient and high-tech, cannot give you advice about when and how to claim.
Better still is to work with a CFP® professional who can look at your whole financial picture, and has the expertise and specialized software to help you make a good decision. This could make all the difference between just getting by in retirement and truly enjoying life in your later years.