Tips on Social Security Claiming Strategies

People nearing retirement naturally have a lot of questions about the best ways to claim Social Security benefits. Benefits can be claimed as early as age 62 but increase by 7-8 percent a year -- plus inflation adjustments -- for each year you defer claiming until the age of 70. Certain advantageous claiming strategies, especially involving spousal benefits, don't become available until you've reached what's called full retirement age -- anywhere from 65 to 67 depending on when you were born. The Social Security Web site has extensive information but unless you know what to look for, it can be a daunting encounter. Here are some recent reader questions about claiming strategies and answers from Social Security spokesperson Dorothy Clark.

[See Tips to Maximize Social Security Benefits.]

Reader One, Question One. I am 63 and my wife is 62. I have sufficient credits after 40-plus years in the job market to qualify and my wife of 40 years would qualify on my benefits (about 35 percent of my reduced benefits). Basically, my employment contract with the government has not been renewed and I am now looking at retirement for both of us. If we both retire now and both draw Social Security benefits, and I re-enter the job market in 2010 with the expectation of earning a salary well above the minimum allowed, I understand that I can withdraw my Social Security application (before my full retirement age), return all funds paid out to both of us, and then re-apply later to receive a higher benefit. I understand repaying the funds and withdrawing my application, but does my wife have to withdraw her's or is it automatic? What will her status be?

Answer: The wife doesn’t file a withdrawal request. She must consent in writing to the withdrawal by her spouse because the withdrawal nullifies her entitlement to spouse’s benefits.

Question Two: As I have earned my salary this year through the end of August - and intend to have retirement effective soon - I believe the "special monthly rule" will apply for the remaining months of 2009 (e.g. the time up to retirement is not figured and any remaining portion/month of the first year is counted for penalty if I earn over $1,180 in that month for the "first year of retirement".) Is this correct? Also, can I apply in advance of the date, and once approved, will it be effective on the date I request or when the paperwork is completed?

Answer: In cases where an individual retires in mid-year and has already earned more than the yearly earnings limit, there is a special rule that applies to earnings for one year, usually the first year of retirement. Under this rule, you can get a full Social Security check for any whole month you are retired, regardless of your yearly earnings. In 2009, a person under full retirement age for the entire year is considered retired if monthly earnings are $1,180 or less; here is additional information. Social Security encourages people to file three months before they want their payments to start. You can file online.

[See Do You Know Social Security Earnings Rules?]

Reader Two, Question One: My wife is 65 (one year older than me) and has been receiving about $540 a month in Social Security since she turned 62. I will turn 66 in July, 2011. I am not currently receiving Social Security payments. What is the best strategy for us? Right now my pension is about $4,200 a month and will decrease to about $2,100 a month when I turn 66. Will the "claim and suspend" strategy work -- can I claim Social Security now at 64, with my wife receiving half of my age 64 Social Security (about half of $2,000) and suspend?

Answer: An individual can file and elect voluntary suspension only for months in which a full retirement benefit is due, in order to earn delayed retirement credits. However, in this scenario, voluntary suspension will not apply because the worker is under full retirement age. For more information on file and suspend, go here, and click on "Are you eligible for benefits on someone else’s record?"

Question Two: Would my wife's check increase when I reapplied for Social Security at 66?

Answer: If they file for benefits when the husband reaches age 66, his wife’s benefits will increase by the amount she will be entitled to as a spouse. Here is additional information on a spouse’s benefits.

[See Billions in Social Security Not Being Claimed.]