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How to max out Social Security

Find out which Social Security claiming strategy will pay the most over a lifetime.

By MSN Money Partner Mar 5, 2012 7:56PM

This post comes from Glenn Ruffenach at partner site SmartMoney.


SmartMoney on MSN MoneyMuch of my mail these days seems to start with the same warm greeting: "What planet are you from?" That's invariably the case when I suggest that readers consider ways to maximize Social Security benefits instead of grabbing a check at age 62, as about half of all retirees do.


I know: Waiting to claim Social Security until your mid-60s or later isn't easy. Many people need the cash, are fearful that the program might change (or collapse), or are trying to avoid tapping their savings for as long as possible. But two trends make this a good time to look at "claiming strategies" for Social Security and help illustrate just how much money is involved.


First, a recent report from the Census Bureau highlights a startling fact: The 90-plus population is projected to quadruple between now and 2050 -- meaning that living into your 10th decade is something to factor into Social Security planning.


Second, a growing number of Web-based tools now allow you to run dozens of possible claiming strategies -- and can recommend how to maximize benefits.


For the examples below, I asked the folks at in Leawood, Kan., for help; I like that the company's lead researcher, Baylor University finance professor William Reichenstein, has written extensively about how best to tap nest eggs. (Using the site's tool runs between $20 and $125, depending on how much personal attention you want interpreting your report.) Given the stakes, I suggest comparing results from a few different sites. You'll find free tools at the Social Security Administration's site, and; another site,, charges $40. (Post continues below.)

Now some numbers. First, we need a way of measuring why one claiming strategy might be better than another. I'm going to use cumulative lifetime benefits as a yardstick. In other words, I want to see, given a specific starting age and life expectancy, which claiming strategy will pay me and a spouse the most money over a lifetime (or, considering there are two of us, lifetimes). You also could look at monthly income, but it can be misleading. More on that in a moment.


We'll start with a simple example. Joe and John can begin collecting $1,500 monthly from Social Security at age 62, or $2,640 a month at age 70. Let's say both live to 92. If Joe claims benefits at 62, his lifetime total will be $540,000. If John waits until 70, he'll net $696,960 -- almost $157,000 more.


If you look solely at monthly income, claiming benefits at 62 looks smart; Joe is getting $1,500 a month for eight years, and John is getting zilch. But again, "longevity risk should be part of your planning," says William Meyer, the founder and managing principal of Social Security Solutions. What are the odds that you will live to 85 or 90 -- or longer? The answer for many: increasingly good.


Now let's look at a husband and wife: Bob and Carol, ages 62 and 58. Bob is scheduled to receive $2,000 at his full retirement age of 66, while Carol is scheduled to receive $1,600 at her full retirement age, also 66. Each, of course, can claim Social Security at age 62. If they do so -- and Bob lives until 83 and Carol lives until 90 -- their cumulative benefits will be $840,600.


But Social Security Solutions offers a more lucrative -- and slightly more complex -- strategy. At his full retirement age, Bob claims a spousal benefit of $800. (Yes, Social Security allows this.) Carol, meanwhile, claims a benefit (based on her earnings) of $1,200 at age 62. Finally, Bob, at age 70, switches to a monthly benefit of $2,640, based on his earnings history, a move that falls under "delayed retirement credits." In this case, the couple's lifetime benefits will total $1,043,520, a gain of almost $203,000 over the let's-jump-in-the-pool-as-quickly-as-possible approach.


The other interesting piece of these two strategies: survivor benefits. If both spouses claim benefits at age 62, Carol -- when Bob dies -- will be eligible for a survivor's benefit (under Social Security's rules) of $1,650 a month. But under the second claiming strategy, she would get a survivor's benefit of $2,640, an extra $1,000 each month.


Now, consider the options for a woman, age 60, who loses her husband. Her benefit at full retirement age is $1,400; his would have been $2,000. She could begin collecting a widow's benefit of $1,430 at age 60. But it might be better for her to pursue a different strategy -- claiming a reduced benefit, based on her earnings history, of $1,050 at age 62 and switching to a widow's benefit of $2,000 at age 66. The difference in total benefits if she lives until age 89: an extra $112,000.


Yes, the numbers can get a little head-spinning. But I hope these examples give you an idea about how much money might be forfeited if you claim benefits early -- and how many claiming options are available. I recently heard this from Mark Ellingson, a retiree in Lake George, Colo.: "Take benefits (at age 62) while you still have good health and can enjoy life." That's tough to argue with. But please, do consider the alternatives.


More on SmartMoney and MSN Money:

Mar 5, 2012 9:27PM

62-years old is not different today than it was 30-years ago. The median age of death has risen very slightly, and the need for long-term funds for 90% of U.S. Citizens just isn't there.


Your government wants you to either:


A. Die shortly after attaining 62- years

B. Die just before turning 62-years, thus to max out your $ input, never received back

C. Continue working until you die, never taking Social Security.


Don't swallow the bait. Enjoy the years that you have left. Do what you must. Retire.

Mar 5, 2012 9:42PM
How about forgetting all the math, give retirees a COLA each year based on the real cost of living instead of the made-up one, and letting people enjoy themselves a little before dying?  Everyone who has worked for a living deserves that much.
Mar 5, 2012 9:27PM

The bottom line is how long do you think you may live.If your life expendancy is 75 or less take SS at 62.However if you believe you will live longer than 75 wait until 66.

The truth is take it at 62 and work a job at the same time.Everything else is a crap shoot

Mar 6, 2012 1:41PM
Take it at 62 and run like hell !!!!!!$$$$$$$$$$
Mar 19, 2012 2:57PM

I intend to collect my social security at 62. My husband began collecting his at 65. He is 70 and has just been diagnosed with pancreatic cancer. He will never collect near what he paid in.


It is YOUR MONEY. Start collecting it as quickly as possible. Life is short.

Mar 19, 2012 1:29PM

To those who believe SS won't be around for them, if you fight for SS, SS will be around. To give up on Social Security now is to doom yourself to poverty in your old age.

Mar 19, 2012 1:14PM

Really, this article is simplistic.  A net present value (NPV) model should be used to factor in the value of the money received at points in time.  Every business major knows this.  Second, in the end, it is all about how long you think you are going to live.  The lower your expectation of being able to live a quality lifestyle, the sooner you should take the benefits.


Too bad we can't all predict the future, but money now is usually better than the promise of money later. Using a  NPV analysis is the only way to quantify the decision.

Mar 19, 2012 1:23PM

How many will make it to 92 years old?  Besides wouldn't you like to still be able to walk and do things rather than stare at the walls of your room collecting a few thousand more waiting to die?


Take the money and run...

Mar 19, 2012 1:38PM
Interesting how some of the tools mentioned cost $. Go the free route. Also the article is based on living past 80!! Start your s.s. at 62 and be ahead of the game. Most of the baby boomers have worked hard all our lives and that money is ours. There is no guarantee we will live to 80 or that ss will be there to collect!...nuff said.
Mar 19, 2012 2:12PM
Life is too short and work is too long. When you are eligible for for Company Pensions & Social Security take the money and run and find away to live within your means, like we all should be doing all along. It is the not doing that, that has gotten us in this mess in the first place.
Mar 19, 2012 1:53PM
  I started paying into S.S. when I was 17 years old and worked in the construction and building trades for 39+ years. I retired at age 56 and draw a nice pention from the union that I paid into my intire career. When I turned 62 last year I made a choise to take early S.S. retirement, (less money) because of health issues, bad back, hips, shoulders, this kind of work takes it toll on you....So its up to you....if you can afford it, go early and enjoy retirement, I highly recommend it!!!
Mar 19, 2012 1:34PM
ridiculous. average life is 77.7 NOT 92. at 77.7 - 80, you are much better off claiming early, not later. check your family history, has anyone in your family lived past 80? if so, how many and how long. your example falls seriously short if you check the census records, it lets you know that a mere 3% thats right 3% of all americans live to the age of 90 and only 1% live to 95. as we age we go to the hospital more and considering that more than 178,000 people die each year from medical malpractice, the odds are not good for any of us to live to the ripe old age of 92.
Mar 19, 2012 1:21PM
I have been collecting since I am 62...$1531 per wife will start when she is 67...2500 per month
Together ..$4000 per month plus a part time job...So we will have about $6000 a month..almost no we both work out and eat well...Healthy , that is!
A Government employee will get $90% of his salary...Almost $8000 a month plus benefits for life...
You know what...I don't give a hoot...As long as I outlive the ****!
Mar 19, 2012 2:07PM
Why even wait to age 62. Plan your retirement, collect early & just manage your finances better. If you think that you will reach 62 & "How many years will you live to enjoy life after all that lifetime work you did, without getting sick & always in the hospital, ER or an accident may happen before 62, wow there goes your retirement?" Just think of it, all this Bureaucratic nonsense the Gov't lays on people so they can spend your money. I know, I work for the Gov't. Plan ahead & retire early to enjoy whatever remaining years you have.
Mar 19, 2012 2:30PM
Alright let me see if I am reading this right. Over 50 your over qualified, a liability to the corporates medical benefits, you are use to making more money and know your worth and now you want us to wait until we are 67 to collect our pensions and social security. How do we live for the 17 years your not talking about. Welfare. Is that fair? Personally I would like to see the promise kept. Work until your 55 be enforced. Social security benefits were not supposed to be spent the way it was spent and now your really asking us not to collect it. Should I call an undertaker now?
Mar 19, 2012 2:23PM
A bird in the hand is worth 2 in the bush ! Did you ever stop and think that it just might be the people taking their Social Security at 62 that will probably bail the Country out of the mess that it is in, because we unlike Government, Banks and Wall Street Investors we spend our money on main street and help keep the money wheel turning here, not hording it or sending it overseas somewhere.
Mar 19, 2012 4:01PM
Sure you will draw more money overall if you start at 70 and live to be 89. The only problem is living that long and how much will you care about money after you reach 80 years old. I think drawing at 62 is best for me as I will still be able to move around and spend it.
Mar 19, 2012 2:26PM
I have to agree with someone the people starting to draw social security now are the ones that have paid into it most of their lives, enjoy it and vote out any greedy politician that try's to steel it and use it for something else.
Mar 19, 2012 3:20PM

The only reason to not take the check is if you're still gainfully employed after 62 and the government would disqualify your benefits.  If you need the money to live on or to enjoy life while you're still able, then you're much better off taking it rather than gambling on whether you'll be around to enjoy it.  If you don't need it, then invest it and know that either you'll have it later, or your heirs will.   Sorry Glenn, but neither you nor any other writer on this subject ever consider that if you wait and then die, the government pockets all those payments that could have been in the bank for your heirs.  Talk about a racket.

Mar 19, 2012 2:35PM

QUOTE : " Let's say both live to 92"


Oh PLEEEEEEZ!!!!!!  Put that on toast!

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