Want Help With the Big Social Security Decision?

Note: We're refeaturing this article as part of Morningstar's October 2014 5 Keys to Retirement Investing special report. This article originally appeared Sept. 10, 2014.

Deciding when to file for Social Security is one of the most consequential financial decisions most Americans will make about their retirement. Opting to claim benefits early, at the Full Retirement Age (FRA), or later can mean hundreds of thousands of dollars in higher--or lower--lifetime benefits for a married couple.

But Social Security's rules are complex, so most of us could use some guidance. Yet, help can be difficult to find. Social Security Administration (SSA) staffers can only give you general information about benefit options--they are prohibited as a matter of agency policy from advising you one way or the other about claiming strategy. Some SSA staffers give advice anyway--although I hear frequently from readers who complain they've been given incorrect information from staffers who are misinformed about some of the program's more complex rules and options.

Fortunately, there are alternatives. A growing number of financial planners are learning the Social Security ropes, and several companies have sprung up that can help you craft a personalized filing strategy for a fee. A variety of robust, free online tools also can help do-it-yourselfers.

The Starting Point
No matter where you seek help, the baseline information you'll need is contained in the annual statement that the SSA prepares for you. The statement tells you how much you can expect to receive if you file at your FRA, at age 70, or at age 62. The statement also contains a record of your annual earnings that were subject to Social Security (and Medicare) taxes--and that's worth checking annually to make sure the latest numbers are accurate, since benefits are determined using a formula that considers your 35 highest-earning years. (If you find an error, contact the SSA at 800-772-1213, or visit your local SSA office; bring along your statement and paperwork supporting your claim of higher income.)

The SSA stopped mailing out paper statements in 2011, but it will resume mailings starting in September of this year for some workers. However, you can always access your statement--and download it as a PDF--by creating a My Social Security account on the SSA website.

It's also worth knowing your FRA, since it's the claiming age from which benefits are adjusted higher or lower. A package of Social Security reforms implemented in 1983 set in motion a gradual increase in FRA from 65 to 67, based on year of birth. If you were born in 1960 or later, your FRA is 67; for everyone else, the number is somewhere in between. The Social Security statement tells you this--but only parenthetically in the line on Page 2 that reports your benefits at various ages. More information on FRA is available in this handy chart at the SSA website.

Advice From Planners
A growing number of financial planners are learning to advise clients on Social Security claiming--but don't assume that your planner is among them.

A 2012 study by the Pension Research Council at University of Pennsylvania's Wharton School found that planners often focus on the wrong thing when advising clients on Social Security, including worries that political gridlock will lead to benefit cuts when the program's trust fund is exhausted in 2034. Issues like that aren't likely to impact people who are close to claiming benefits--and in my view, it's highly unlikely that Congress will allow benefits to be cut at all.

The study also found that many advisors frame Social Security decisions in terms that incorrectly encourage early filing decisions. And a relatively small number were inclined toward strategies that encourage delayed filing.

One clue about your planner's Social Security smarts is whether she uses software to analyze choices. Popular programs include SSAnalyzer, Social Security Timing, Maximize My Social Security, SS Income Planner, and Social Security Explorer. Maximize My Social Security is included in ESPlanner, a widely used financial-planning software package for professionals.

Asking your planner a few basic questions also can help you determine whether she is up to speed, says Andy Landis, a former SSA employee who now educates financial advisors and retirement-plan sponsors about Social Security benefits. "Simply ask the planner--'Are you familiar with the file and suspend strategy or spouse-only restricted applications?' That should separate the wheat from the chaff instantly."

Although it's not a litmus test, a growing number of planners are taking Social Security training classes, and two companies have launched certification programs. The National Social Security Advisor designation was introduced last year, and the Certified in Social Security Claiming Strategies designation will be rolled out in September.

Advice at Work
If your workplace retirement plan includes a third-party financial advisory service, Social Security claiming may be part of the offering. You may already be paying a fee for the advisor's investment advice, so it's worth finding out if Social Security help is available as part of the package.

Financial Engines, the country's largest independent advisory service, recently rolled out an online Social Security claiming tool for workers or retirees in plans it serves, coupled with help on integrating Social Security income with portfolio drawdowns; one-on-one guidance from an advisor is also available.

Guided Choice also has a Social Security optimization feature coupled with one-on-one advice; the service is available to active employees and retirees. Morningstar, which also works with 401(k) plans, doesn't offer Social Security claiming guidance yet but plans to add it, a spokeswoman says.

Advice From a Specialist
Several companies that specialize in Social Security claiming can help you design a claiming strategy for a small fee. Some of these services are software based; others connect you with an advisor for one-on-one counseling. When evaluating an online or software-based service, look carefully at the usability and complexity of the tool--some require that you input a great deal of information on the front end, while others require only very basic information from you and your spouse. At minimum, you should have your date of birth, Social Security numbers for yourself and your spouse, and the benefits information from your most recent Social Security statement.

Social Security Solutions was developed by financial-services veteran William Meyer and William Reichenstein, a professor of investment management at Baylor University. The company's web-based tool is simple to use--you get started by inputting basic data about yourself and your spouse--date of birth and initial benefit information from your Social Security statement. A report listing your options--and likely amounts gained--is delivered. Fees range from $20 to $250, depending on the amount and degree of personalized advice you prefer.

Maximize My Social Security was developed by Laurence Kotlikoff, an economics professor at Boston University who also created ESPlanner, a broader financial-planning software suite. Kotlikoff licenses the Social Security offering for $40 per year; it delivers options as a PDF report. This tool may require up to a dozen data points from you in order to deliver its findings.

Social Security Choices was developed by a team of economists; you can get a custom report for $39. Several free basic calculators are offered; in-depth software is sold to financial advisors for a fee.

Free Tools
If you want to roll up your sleeves and work the numbers on your own, some very good free tools are available online that can provide an assist.

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 offers a free tool that lets you input basic information about yourself and your spouse. You can 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 percentage of your living expenses that will be covered by Social Security--and it allows you to tweak the expense assumptions. AARP also offers a searchable database of thousands of frequently asked questions about Social Security.

Financial Engines offers a free version of the Social Security tool that they use to serve 401(k) clients. The tool allows you to input an initial claiming strategy and then computes likely lifetime benefits. Then it walks you through possible options that pay more. (The key difference is that the free version doesn't offer portfolio integration.)

A Caveat About Online Tools
Social Security filing is a key financial life decision, so be careful about relying too much on tools of any sort. I ran the numbers for myself and my wife on several of the free websites; each is built with slightly different decision-tree choices, and they didn't all agree on our recommended strategies. This is a decision you'll want to double-check carefully by running numbers in more than one tool or by consulting an expert advisor.

"Using a calculator can help with the process, but you don't want to rely on them alone," says Jim Blankenship, a financial planner and author of A Social Security Owner's Manual: Your Guide to Social Security Retirement, Dependent's, and Survivor's Benefits. "It's possible that you mis-typed an answer--like a birth date--or that you didn't fully understand a particular option that you selected."

Blankenship, who has been conducting a survey of online tools that won't be finished until later this year, also warns that calculators don't always have sufficient flexibility to deal with the nuances of an individual's situation. An example: None of the free calculators he's been surveying include a way to show the impact of the Windfall Elimination Provision and Government Pension Offset provisions of Social Security, which adjust benefits for some government workers participating in pension plans.

He notes that most of the free tools also don't help with survivor-benefit calculations for widows. "That can have a huge impact on some folks," he says.

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 Morningstar.com.