My February column, “18 Social Security Surprises Facing Advisors, Clients” generated a bit of reader mail so I thought I’d piece together a few more of the quirks from one of our country’s most complex programs. Here’s a couple dozen to ponder.

1. Sure, if clients wait to start retirement benefits, their monthly check is larger, but many don’t realize just how big the increase can be. If they wait until 70 to collect, the benefit can be up to 76 percent more than what would have been received at 62. That’s a substantial increase from an action that doesn't create any market risks. The increase comes from avoiding the “early retirement reduction” and getting “delayed retirement credit.” If clients work after age 62, Social Security’s re-computation of benefits may increase the benefits even more. 

2. For delaying the start of retirement benefits for the higher earner, the effective return a couple can make is easily among the best available for a low risk “investment.”

3. If clients regret starting retirement benefits within the first year, they can withdraw their application and repay all the benefits received. It will be a complete “do-over” as though they never filed.

4. Even if a client starts retirement benefits early, once she reaches her full retirement age (FRA), she can suspend benefits. She will earn delayed credits (8 percent per year) from that point until she lifts the suspension. This is often called “start stop start.” This can be quite handy for those who wish they had not started early but are past the 12-month window to withdraw an application.

5. Start stop start can be handy also for couples with a particular age difference that doesn’t allow for file and suspend. You must also reach your FRA to file and suspend.

Consider a couple whose FRAs are 66, but the high earner is four years younger than the low earner. The high earner may not think to start retirement benefits at 62 due to the reduction of the benefits.  At that point the low earner would be 66, but can’t get a spousal benefit because spousal benefits are only payable when the other spouse is collecting or has filed for and suspended benefits.

The 62-year-old high earner can claim early and the 66-year-old can collect a spousal benefit.  Four years later, the high earner can suspend benefits and earn delayed credits up to age 70.  Depending on the amounts and life expectancies, this can work out in the couple’s favor.

6. The exact amounts matter for other benefits as well, like those for survivors. Some widows/widowers will do better taking their survivor benefits at 60 and their retirement benefits at or after their FRA. For others, they receive more doing the opposite, starting their retirement benefits early and taking survivor benefits at their FRA.

7. If a client starts collecting her retirement benefit before 70 but after full retirement age, her monthly check won’t reflect the full delayed credit until the next January.

8. If a client is married, only she or her spouse can receive spousal benefits at a time. The other would be receiving (or have suspended) their own retirement benefit.

9. “Half your spouse’s retirement” is the common description of a spousal benefit, but many spouses don’t get that much and are disappointed.

Spousal benefits are based on the primary insurance amount (PIA), which is the retirement benefit payable at FRA. If one delays their retirement benefits until age 70, the spousal benefit does not increase above half the PIA.  Say a 66-year-old woman’s PIA is $1,000, but she waits until 70 to collect $1,320. Her spouse’s spousal benefit is half the PIA ($500), not half of $1,320. These amounts ignore any inflation adjustments.

If a client is not full retirement age and her spouse is receiving benefits, she cannot elect to receive a spousal benefit or her retirement benefit. Automatically, she will be deemed to have started her retirement early and receive a supplement (also reduced for starting early) if the total will be higher. The supplement will be less than half her spouse’s retirement benefit.

10. The retirement benefit collection status of a client's spouse in the month she files for early retirement benefits is critical. If the spouse has not filed when she files, she can get just her reduced retirement benefits, and at her FRA she can add a full supplement. As mentioned above, this still won’t be 50 percent, but it will be more. This trips up a few couples who file in the same month and in which one or both are filing early. 

11. While a client can’t get a spousal benefit off her spouse’s record until the spouse collects or files and suspends his retirement benefits, she can get a spousal benefit from an ex-spouse, even if he hasn’t filed. The client must have been married for at least 10 years, divorced for two years, not currently married, be at or past FRA, and her ex-spouse must be 62 or older. Under these circumstances, she can delay benefits based on her earnings record and earn delayed credits.

If your client applies before her FRA, she will be deemed to have started her retirement early.

12. A client who works in her sixties can increase her retirement and other benefits, but working and collecting retirement benefits prior to her FRA means benefits are subject to the earnings test and can be reduced.

13. If a client starts retirement, spousal or widow/widower benefits before her FRA and experiences a reduction due to the earnings test, all is not lost, at least for retirement benefits. Her retirement benefits will increase at her FRA based on the number of months of benefits she forfeited. It is called the “adjustment to reduction factor.” Spousal or child benefits lost to the earnings test are lost. The adjustment to the reduction factor does not apply to those benefits.

14. The above adjustment doesn’t mean starting early doesn’t matter. The client may get paid back, but her retirement benefit is the reduced amount and other benefits like spousal and widow/widower benefits key off that number.

15. Another issue with the reductions from the earnings test comes if a client is collecting a spousal benefit prior to her FRA and her spouse is collecting his retirement benefit before his FRA. If her spouse’s retirement benefit is reduced because of his earnings, the client's spousal benefit can be reduced, too, even if she doesn't work. If she does work and earns enough, even more reductions are possible. 

16. Charlie Chaplin fathered kids into his seventies. If your client and her spouse or ex-spouse had a family later in life and one is collecting retirement benefits, the kids can get child benefits through age 17, or 19 if still in secondary school.

17. If the kids can get benefits off a spouse’s or ex-spouse’s retirement benefits, the client can get a mommy/daddy benefit too until the child reaches age 16.

18. Minor or disabled children can get survivor benefits from a deceased spouse or deceased ex-spouse’s record. The age limit is 19 if the child is still in secondary school, but there is no age limit if they were disabled prior to attaining adulthood.

19. Regardless of age, a client can collect a mommy/daddy survivor benefit, too, if the deceased spouse or deceased ex-spouse died and the union produced children who are still under age 16.

20. Because these mommy/daddy benefits are payable no matter how old one is, if a client is getting mommy/daddy survivor payments because of an under age 16 beneficiary, she might not want to claim her standard spousal survivor benefit at age 60.  Claiming the standard spousal survivor benefit will permanently reduce the amount paid for claiming prior to FRA. The mommy/daddy survivor benefit is not subject to such a reduction.

21. However, if a client is working and the mommy/daddy survivor benefits are lost due to the earnings test, she won’t get the adjustment to the reduction factor described earlier.   

22. The total benefits to a client, her spouse and their children that can be received on her earnings record can’t exceed a family maximum.

23. I don’t trust or rely on Social Security’s online benefit calculators. They seem to have trouble with most everything other than straight retirement benefits.

24. On a positive note, for younger folks, benefit estimates may be notably less than what will actually be paid.  Apparently, the Social Security site assumes no inflation or real wage growth.

Yes, indeed, the Social Security system can be among the most complicated programs you and your clients will have to navigate, but it also offers opportunities to those who can navigate the ins and outs.

Dan Moisand, CFP, has been featured as one of the America’s top independent financial advisors by Financial Planning, Financial Advisor, Investment Advisor, Investment News, Journal of Financial Planning, Accounting Today, Research, Wealth Manager, and Worth magazines.  He practices in Melbourne, Fla.  You can reach him at [email protected]