Using Tech to Optimize Your Social Security Benefits

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Benefits are adjusted annually for inflation, and they are not affected by the ups and downs of financial markets. Perhaps most important, benefits are guaranteed for life, which makes Social Security an important form of insurance against the risk that you’ll run out of money late in life. That can be especially important for women, who tend to outlive men but also earn less income, generating lower levels of retirement assets.

For many individuals, the best answer is to delay claiming as long as possible, up to age 70.

Your monthly Social Security benefit amount depends on when you file. You can claim the retirement benefit as early as age 62, or wait as late as age 70, but the amount hinges on your full retirement age — the point when you qualify to receive 100 percent of the benefit you have earned. Currently, full retirement age is 66 and a few months for most people. If you claim after full retirement, you’ll receive credits for delayed filing; claim earlier and there will be early-claiming reductions. Claiming at the full age is worth 33 percent more in monthly income than a claim at 62, and a claim at age 70 is worth 76 percent more.

“Almost everyone takes it far too early,” Dr. Kotlikoff said. “About 6 percent of us wait until age 70, but it should be 85 percent.”

But there is no one-size-fits all answer — especially for married couples, who should have a coordinated filing strategy. “It often makes sense for the spouse with a lower earnings history to file earlier, because that increases the household’s total expected lifetime benefits,” said Mike Piper, a certified public accountant who developed Open Social Security, which is widely viewed as the best free online claiming tool.

Filing early can also be a sensible option for people who retire prematurely because of job loss or poor health. And Social Security claiming should be a part of a broader analysis of expected retirement income from retirement accounts and other annuity-style income — such as a defined-benefit pension. Taxation of retirement income can also be an important factor in the success of your plan.

Begin your analysis with your Social Security statement. This crucial document from the Social Security Administration lists your annual earnings from the time you started contributing to Social Security and tells you how much you can expect to receive at various ages — very important numbers for any “what if” claiming scenarios you may want to run. It’s important to establish a free account at the administration’s website, because statements are mailed only to people 60 or older.

The Social Security site also offers an informative section on benefits claiming, and a very basic, free retirement estimator feature that can calculate benefits based on your earnings history. The tool focuses on individual benefits — not spousal or survivor — and does not calculate lifetime cumulative benefits. It also does not permit side-by-side comparisons of claiming options.


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