If you’ve been reading here very long (or pretty much anywhere else for that matter), you’ve probably seen a lot of opinions on Social Security claiming strategies. It’s a very personal choice, because the only way to really be “right” is to know how long you (and perhaps your spouse) will live. In my own case, I’m delaying my Social Security benefits to the latest possible age. This article will show you why.
Delaying my Social Security
I intend on delaying my Social Security filing to age 70. At the same time, we intend for my wife to begin her Social Security at age 62. We’ve chosen this strategy for three primary reasons:
- By delaying, I am maximizing an income stream that is truly unique – no other stream of income that I know of has these three factors:
- has inflation protection (annual cost of living increases) built in;
- has no upper limit (no matter how long I or my spouse live, the benefit continues); and
- is tax-preferential (at max, 85% is included as taxable income).
- By delaying and maximizing my benefit, I am also maximizing the survivor benefit that will be available to my wife if I pre-decease her.
- By starting my wife’s benefit early, we will receive that benefit for the longest possible time.
By using these two strategies, we are maximizing the timeline of receipt of my wife’s benefit, even though it will be reduced. Her benefit amount will be a bit less than mine, but not so low that she will be eligible for a spousal benefit. This way we’ll receive her benefit for 8 years before we begin receiving my benefit. At the same time we’ll maximize the amount of the benefit that potentially will last the longest – assuming one or the other (or both of us!) live past approximately 82 years old. This maximized benefit amount will have the three factors (inflation protection, no upper limit, and tax preferential) built-in to the highest amount we can get.
I have no doubt that the system will be adjusted to deal with the coming trust fund shortfall and have faith that current beneficiaries will continue to be paid. It’s happened before, and will happen again. Nonetheless, the filing strategy that I’ve outlined above does take this factor into account. The possible shortfall of the system is yet another reason to start one benefit earlier, in order to receive it for a longer period of time.
Comparing to other sources
The three factors listed above (why I’m delaying Social Security item #1) are truly unique. Let’s look at other income sources to compare (using the a, b, and c factors from above):
IRA/401k account –
a) has potential inflation protection built in, but only to the extent that the market performs well during the period. By comparison, Social Security’s COLAs are built-in to the system and apply according to economic changes.
b) It could be argued that an IRA/401k, if you only take sustainable withdrawals (using, for example 4% as your rate), that the fund could last for your entire life. But the point is that your 401k or IRA is a finite amount – and it can be drained completely if you had to have the money. Then you’re done. This is not so with Social Security benefits, at least under today’s rules. You’ll have another check coming the following month, as long as you live.
c) IRA/401k funds, if they are completely tax-deferred, are included 100% as taxable income. By comparison, Social Security benefits can be excluded from tax altogether, or included at a 50% rate, or at maximum an 85% rate. This item is eliminated if your IRA or 401k is Roth-type, but the tax being paid up front on contributions offsets some of this benefit.
Pension –
a) some pensions have inflation protection built in, but the majority do not.
b) typically pensions are payable over your entire lifetime, and may also be provide income for your spouse’s lifetime if you’ve chosen that option. But choosing a 100% joint-and-survivor option results in a reduction of your pension benefit in order to provide the spousal lifetime option, unlike Social Security benefits. Your spouse’s survivor benefit does not reduce your own benefit by providing it to him or her. It is true that the spouse’s own benefit will go away if he or she becomes eligible for the survivor benefit.
c) most pensions are 100% included in income. Some pensions include a provision for pro-rata return of your own participation in the plan (contributions you’ve made) tax-free, but this is less common than the 100% variety.
Annuity –
a) depending on the type of annuity, some inflation protection is built in, but often only to the extent of market returns (as with the IRA/401k).
b) as with pensions, depending on the type of annuity and the payment plan, there may be income for your life and your spouse’s life. These options are not without downsides, as the available income will be reduced to provide your spouse with lifetime benefits as well.
c) like pensions, there may be a provision for tax-free return of contributions (depends on your annuity), but otherwise are generally 100% included as taxable income.
So, you can see, there’s no silver bullet. The factors listed above are enough for me to choose delaying my Social Security benefit to age 70, while starting my wife’s benefit earlier. And as mentioned before, this is a personal decision, bound to be different for everyone. What are the driving factors behind your choice of Social Security filing strategies? Share in the comments, I’m interested in knowing what you’re thinking!
It may not be all that common, but if you’re eligible for and drawing Social Security retirement benefits and you have a child (or children) under age 18 – did you realize that your child (or children) is eligible to receive a benefit from Social Security as well? This is in addition to the “child in care” benefit that your spouse is also eligible to receive upon your filing for benefits – subject to a Maximum Family Benefit, which is usually between 150% and 180% of the 
Many folks find, upon filing their income tax return, that a portion (often a significant portion¹, up to 85%) of their Social Security benefits are taxable. Upon discovering this, it’s also often a surprise that, since the benefit is taxable, there hasn’t been enough tax withheld throughout the year. This not only requires you to pay up come April 15, but it can also cause a penalty for underpayment of tax to be applied. This underpayment penalty is likely if the amount of underpayment is $1,000 or more. You need to adjust withholding.
When the Medicare Modernization Act was passed in 2003, one of the provisions in that law was to require a sort of means-testing to the premiums paid for Medicare Part B (physicians) and Part D (prescription drugs). It was determined that the subsidization of Medicare costs by the government should be in part borne by folks who have income above certain levels. The income used to determine your IRMAA adjustment is from your tax return 2 years prior to the current year. So ancient history can come back to surprise you when you least expect it.
For anyone who has ever had a 401(k), 403(b), or a deferred compensation (457) retirement plan, (which is a high percentage of you, I assume) – there’s a major difference to an IRA that you might find interesting and/or useful. The difference is in the legal requirements for beneficiary designation.
Previously there could be an enhancement to the overall benefits being received by suspension of benefits. In many cases this was known as “file and suspend”. In the days before the change to the rules, one spouse would file for his or her own benefit and then immediately suspend benefits. Then the other spouse would be allowed to file for spousal benefits, while the first spouse (with the benefit suspension) could delay receipt of benefits until a later age. This was only allowed when the suspending spouse was at least Full Retirement Age.
When you have Medicare Part B, your insurance pays for doctors, outpatient care and medical equipment not covered by Part A. But Medicare Part B doesn’t cover all the costs for this care. There is a deductible and coinsurance that you have to cover. If you have a Medigap policy or Medicare Advantage (Part C), some or all of these deductibles and coinsurance may be covered as part of that policy.
When you have Medicare Part A, this insurance pays for hospital care, including skilled nursing facilities and other institutional settings. But Medicare Part A doesn’t pay for everything – you must pay a deductible and coinsurance when you have a claim. If you have a Medigap policy or Medicare Advantage (Part C), some or all of the deductible and coinsurance may be covered as part of that policy.
The recently-passed 
The Social Security system has provisions for taking care of surviving spouses of workers who have earned credits under the system. There are two particular benefits that you should be aware of – a small death benefit of $255, and Survivor Benefits based upon the worker’s Primary Insurance Amount. It is the latter benefit that we are discussing today.
Earlier this year I wrote about checking your withholding and estimated payments in light of the changes to the tax laws. When I wrote that, many of you were in the middle of finishing up your tax returns, so I imagine it probably went by the wayside. Now, since we’re 2/3 of the way through the year, is a perfect time for a paycheck checkup! Plus, if you’re retired, it’s a good time for a review of your estimated taxes as well. Since you have 4+ months left in the year, you can make adjustments if needed.
So, what funds can be rolled over from your qualified retirement plan (not an IRA) into another retirement plan or IRA? Interestingly, the IRS doesn’t specifically tell you what can be rolled over – but rather, what cannot be rolled over. So the definition of eligible rollover distributions includes any monies from a qualified account that are not specifically disallowed.
When you have a non-SS-covered pension and you are receiving Social Security benefits, either WEP (
You’re going through a lot, having to deal with your spouse’s passing… and you have plenty of decisions that have to be made with regard to handling his or her final affairs. All of the financial stuff must be dealt with as the will or probate determines, and you (or the estate’s representative) have to work through all of those arrangements. It’s difficult to deal with all of these things, but you have to do so. But there’s a bit of good news for you: you don’t have a deadline for spousal IRA. You can take your time dealing with the IRA(s) that you have inherited yourself.
Sterling Raskie, MSFS, CFP®, ChFC®
The latest in our Owner’s Manual series, A 401(k) Owner’s Manual, was published in January 2020 and is available on 
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An IRA Owner’s Manual, 2nd Edition is available for purchase on Amazon. Click the link to choose the 
Jim’s book – A Social Security Owner’s Manual, is now available on Amazon. Click this link for the 
And if you’ve come here to learn about queuing waterfowl, I apologize for the confusion. You may want to discuss your question with Lester, my loyal watchduck and self-proclaimed “advisor’s advisor”.