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Mark Miller: Remaking Retirement

Social Security: Find Your Best Filing Strategy

Consulting the right advisor, or even an array of online tools, could bring you thousands of dollars in additional lifetime benefits.

For most households, there's no retirement resource more important than Social Security. And making smart decisions about when to file for benefits can make a difference of thousands of dollars during your lifetime--especially for married couples, who can take advantage of the program's valuable spousal and survivor benefits.

But many Americans don't take the time to understand Social Security's benefit structure so that they can optimize their benefits, and many simply don't understand the program. A 2010 survey by the Pension Research Council at the Wharton School of the University of Pennsylvania found only 25% of respondents could correctly answer a question about how Social Security benefits are calculated. Forty-three percent didn't understand that Social Security benefits can be taxed in certain situations, and the same proportion did not know that benefits are adjusted for inflation.

Most important, most people don't seem to understand the relationship between the full retirement age, claiming age, and the level of benefit they can receive. For example, 56% of men and 63% of women filed for benefits sometime before the full retirement age of 66 in 2011 (the most recently available data). This is despite the fact that filing at the first age of eligibility (62) gets you just 75% of your full benefit. Waiting until the full retirement age (currently 66) gets you 100%, and waiting until age 70 gets you 132% of your benefit.

Delayed filing can be especially beneficial for women, who tend to outlive men and run a higher risk of falling into poverty at advanced ages. That makes it all the more important for couples to leverage the benefits of the higher earner to benefit the surviving spouse, with strategies such as file-and-suspend. Steve Vernon, an actuary and retirement specialist, offers this illustration of how file-and-suspend works; InvestmentNews contributing editor Mary Beth Franklin and I also discussed the topic during our session at Morningstar's Individual Investor Conference earlier this year.

It's hard to imagine a more important financial decision to get right. One third of today's seniors rely on Social Security for almost all (90% or more) of their income, according to the National Academy of Social Insurance; two thirds count on it for more than half of their income. And the numbers are higher still for single, retired women (widowed, divorced, or never married).

So, many of us could use some help when it comes to Social Security filing. The question is: Where to get it?

The Social Security Administration can help--to a point. If you visit one of Social Security's field offices, staffers will be happy to help you run numbers showing what you'll be paid over time, depending on when you file. But they don't make recommendations. "Their policy is to not advise people on what's best for them," says Andy Landis, a former SSA employee who now educates financial advisors and retirement plan sponsors about Social Security benefits. "They can tell you 'if you take Plan A, here is what you'll get paid over 10 or 20 years, and if you take Plan B, you'll get this.' What they won't do is say, 'you should take Plan A.'"

SSA offices also can't always be relied on for information on more complex strategies, such as file-and-suspend. "Some people there understand it, some don't," says Helen Modly, a planner and executive vice president of Focus Wealth Management in Middleburg, Va. In a column on, she recently wrote about her experience dealing with the SSA on behalf of a client seeking to set up a file-and-suspend strategy.

How about financial planners? A study published last year by the Pension Research Council found that advisors often don't provide the best advice to their clients--especially on the optimal age for claiming benefits. The researchers found that many of the conversations advisors have with clients focus on the political questions swirling around Social Security's financial health--issues that aren't relevant for people close to filing now. The study also found that many advisors frame claiming decisions in terms that incorrectly encourage early filing decisions. And a relatively small number are inclined toward strategies that encourage delayed filing.

The odds of getting good Social Security help are better if you're working with a registered investment advisor because they tend to take a bigger-picture view than broker-dealers. "It depends on the type of planner," Modly says. "If they're focused primarily on selling investments, they don't know squat [about Social Security]. But advisors who are doing planning and wealth management are probably pretty well-up-to-speed."

Frank Horath agrees. He's the founder of ClientFirst Financial, which trains independent broker-dealers on Social Security claiming strategies. "If I ask a room full of broker-dealers how many of them have made Social Security a main feature of their services, only a few hands will rise. Very few have software to help them deal with this, and very few are running the math to help clients with maximization."

Horath recommends that clients talk with their advisors to get a sense of their Social Security literacy. "Ask if they're confident about advising you on this. Ask them if they can generate specific numbers to determine maximum lifetime benefits, assuming a certain life expectancy. And ask if they have the software or financial-planning tools to do that, and to add whatever the finding is into the planning software that they use."

Online tools offer another route to guidance. An increasing number of Web-based tools and services offer Social Security assistance--some are free, others are fee-based. Here's a rundown.

Fee-Based Tools
Although most of us tend to look for free stuff online, paying a fee for Social Security assistance can be worth a small investment because the payback in lifetime benefits for a good strategy could total tens of thousands of dollars, depending on your longevity. Fees vary from $40 to several hundred dollars.

SocialSecuritySolutions offers a variety of fee-based services, with price depending on how much personal assistance you want. This resource is simple to use and generates an easy-to-understand downloadable report containing recommendations on how you can maximize benefits. It's especially good at identifying strategies for married couples. To get a report, simply input names, marital status, birth dates, and best-guess life expectancy along with your projected Social Security benefit at full retirement age. You can also get a personal consultation with one of the firm's advisors.

Maximize My Social Security is powered by ESPlanner, a broader financial-planning software application developed by Laurence Kotlikoff, an economics professor at Boston University and expert on Social Security. This tool requires more work on your part, but it also gives you the power to customize results based on your assumptions about your future earnings, inflation, and economic growth. You can even change the projections if you think Social Security benefits will be cut in the future.

Free Online Tools
Social Security Administration Retirement Estimator. This tool estimates benefits based on your personal earnings record. It also allows you to run scenarios based on alternate filing dates. But you can't run spousal or survivor scenarios here.

T. Rowe Price Social Security Benefits Evaluator. The mutual fund giant recently launched a tool that offers some of the features available from fee-based tools. Begin by inputting basic information about yourself and your spouse. Then select among various Social Security goals--for example, setting different retirement ages for yourself and a spouse, maximizing lifetime benefits, taking benefits as soon as possible, or maximizing income for a surviving spouse. The tool then describes a strategy for achieving those goals.

AARP Social Security Benefits Estimator. AARP offers a calculator that lets you do "what if" planning based on taking Social Security at different ages. It's similar to the SSA's estimator in this way, though it also estimates the percent of your living expenses that will be covered by Social Security--and it allows you to tweak the expense assumptions. Unfortunately, the tool doesn't include any spousal or survivor decision-making tools. AARP also offers a useful database of thousands of frequently-asked questions about Social Security.

AnalyzeNow was created as a labor of love by Henry "Bud" Hebeler after his own retirement from  Boeing (BA), where he was a top executive and corporate planner. Hebeler offers a wide array of free retirement-planning tools, including a very robust Social Security decision-making tool. You must input a fair amount of data on your own, including estimates of tax rates in retirement, rates of return on investments, and future inflation rates. And the tools are spreadsheet-based, so they require basic computer and spreadsheet literacy.

Social Security Timing sells its flagship filing-decision software only to financial advisors but offers consumers a free snapshot recommendation on possible spousal options.

Social Security Choices was developed by a team of economists. Several free basic calculators are offered; in-depth software is sold to financial advisors for a fee.

Spousal and survivor benefits FAQ. My website,, has a page of frequently asked questions about spousal and survivor strategies.

Ask Mary Jane is a free service provided by the National Committee to Protect Social Security and Medicare.

Mark Miller is a retirement columnist and author of The Hard Times Guide to Retirement Security: Practical Strategies for Money, Work and Living. The views expressed in this article do not necessarily reflect the views of

Mark Miller does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.