Page 26 - Investment Advisor July/August 2021

WOMEN IN WEALTH

By Marcia Mantell

Can You Spot the Social Security

Claiming Mistakes?

Maximizing spousal benefits under Social Security can be
complicated. Here’s a case study.

W hen helping clients think

through
their
Social
Security claiming strate-
gies, it’s important to ask key questions,
get the technical details right, apply the
rules correctly and connect the dots to
Medicare, working and taxes. There is
a domino effect on client decisions they
don’t realize.

A CLIENT SITUATION
Tony is 68, born in 1953. He plans to
claim Social Security at 70. His $2,800
primary insurance amount (PIA) will
grow to about $3,800 with delayed
retirement credits. His wife, Lucia, is
64, born in 1956. Her PIA is $1,000. She
plans to wait until her full retirement
age (FRA) to claim her spousal benefit. Social Security plans and found an addi- GETTING THE TECHNICAL
Tony decided to retire at the end of tional opportunity. Since Tony was born RULES RIGHT
June and pursue other activities. Some in 1953, he was still eligible to claim The advisor was correct that Tony can
will provide limited income. Lucia is a Social Security under the grandfathered claim just a spousal benefit if Lucia
freelance writer. She’ll continue to take “restricted application” — a loophole claims her own benefit. Those born
on jobs for a few years. that allowed spouses to claim a spousal before Jan. 2, 1954, are still grandfa-
Tony was leaving his large, corpo- benefit today, then claim their maxi- thered into the old “restricted applica-
rate employer, which meant his group mum benefit at age 70. However, for tion” rules. Lucia’s own benefit will be
health insurance coverage was ending. Tony to claim his spousal benefit, Lucia reduced 12%, to $880 per month. But,
He decided to sign up for Medicare right needed to first claim her own Social with Tony’s spousal benefit of $500 per
away. Lucia will use COBRA continua- Security benefit, even though she wasn’t month, it more than makes up her $120
tion insurance to bridge her temporary at her FRA. monthly loss. This newfound $1,380 was
coverage gap. The advisor explained that although a welcome “bonus.”
Before locking in their final decisions, Lucia would get a reduced benefit now And it is temporary. Tony will switch
they wanted confirmation and valida- for claiming early, it will increase once to his own maximum benefit at 70, in
tion from a financial advisor about their Tony claims at 70. Then she will get half two years. At that same time, Lucia is
plans. Tony and Lucia had been do-it- of his benefit payment. Therefore, this at her FRA, so she’ll get half of Tony’s
yourselfers until now, but since retire- would be a relatively short-term reduc- $3,800, or $1,900, he advised them.
ment is such a big financial decision, tion, and they would get unexpected Together, they’ll receive $5,700 per
they wanted some expert help. extra cash from Social Security as they month in Social Security benefits. And,
start their retirement years. by waiting until 70, Tony has provided
THE RECOMMENDATION This is where things went off the the best layer of protection he can for Adobe Stock
The advisor they chose reviewed their track. Lucia, if he is the first to die.

24 INVESTMENT ADVISOR JULY/AUGUST 2021 | ThinkAdvisor.com