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Social Security Tips for the Astute Retirement Advisor

Advisors who know the ins-and-outs of Social Security help their clients navigate the rules and get the most out of their benefits. While the notion of filing at age 62, sitting back and collecting that cold, hard cash is the approach that might appeal to most, it isn't always advisable.

It turns out that clients may want to keep working now and deploy specific strategies that ensure they will receive enhanced benefits. In some instances, their families can also increase their benefit amounts with proper planning (and if they meet certain criteria.)

Click through our slideshow to see just a few examples. In order to better understand the nitty gritty, Financial Planning reached out to advisors and experts across the country.

Data and takeaways in this slideshow originally ran in a 30-day series on Social Security and retirement income strategies.
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Remember: The Income is Nothing But Net Income

That “pile” of Social Security money clients anticipate receiving is probably about to get smaller. In order to qualify for the maximum payout, the collector of the benefit must have paid the maximum Social Security tax for 35 years. This means that some will receive less from Social Security. And, in certain instances, clients will receive far less.

So, for example, a couple with Social Security income between them of $50,000 that desires $90,000 a year in retirement has an annual gap of around $40,000. However, at a 4% initial withdrawal rate, this couple could still have a $1 million retirement goal. Keeping the payout amount in realistic net numbers is key for planning.

Help Clients Get Real About Social Security
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Check in From Time to Time

While most advisors don’t do an annual Social Security check up for their clients, every few years, advisors like Stefan Prvanov, president and CEO at Blankinship & Foster, a wealth management firm in San Diego, run occasional projections as clients approach retirement age.

"Our preference is to use an actual copy of the client's most recent Social Security statement," he says. "Alternatively, we'll have the client create an account on the Social Security website and get the statement.”

Retirement Income: Time for a Social Security Checkup?
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Who Should Collect at Age 66

At 66, clients can earn any employment amount and still receive their full Social Security benefit. This is in addition to avoiding the 25% benefit reduction imposed for collecting at age 62.
Additionally, Medicare premiums are due for many people at age 65. Having the payments directly subtracted from a Social Security direct deposit is easier than writing a monthly check.

Social Security: When to Claim at 66
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Working Past Age 70 Pays Off

The Social Security Administration re-calculates benefits every year based on a retiree's 35 highest-earning years. As such, retirees that held off until 70 to saw an 8% boost in each of their last four working years.

Additionally, retirees with low benefit levels and pay that remains flat can expect to see a 9%-10% boost in benefits if they work until age 75. While this increases if the person gets raises, keep in mind that the increase is lower for higher wage earners.

Why Working Past 70 Pays Off
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Consider the Children

Dependents of retired, disabled or deceased parents can collect benefits through high school age (typically age 18) even if only one parent is deceased or a parent is receiving Social Security.

Payments are extended until age 20 if they are still in high school at that time. Dependent children who are disabled and live at home can receive the benefits on a parent’s account until they are 19. If the disability prevents that grown child from working, they can collect beyond age 19. A dependent child can receive 50% of the parent's benefit amount, or 75% of a deceased parent's benefit.

Social Security: Don't Forget the Kids
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Deferral Has its Merits

A 62-year-old considering filing for Social Security can assume a monthly benefit of $750 at 62, if they wait until 70 to collect, their monthly benefit (in constant dollars) will be about $1,320 per month, or 76% higher.

However, choosing to receive that substantially higher benefit means they miss out on 96 months of benefits, or about $72,000. To earn all that missed money back, figuring in constant dollars, the client would have to live past 80.

Don't Let Clients Miss Out on Survivor Benefits
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Your Clients Can Turn Back the Clock

With the penalty-free reversal, clients who retire and claim benefits at 62 have a 12 month window to reverse their decision and repay the benefits they’ve received without penalty.

The file and suspend option is when a married couple with two earners chooses one spouse to file for benefits at full retirement age and then suspend the benefits until age 70, allowing for the other spouse to collect spousal benefits on the first spouse’s account while leaving their account untouched to continue growing until age 70. In order to undo the option, the recipient can cancel the file-and-suspend. Social Security then pays out any foregone benefits as a lump sum.
Another area where a client can redo a Social Security decision is spousal benefits. The spousal benefit, for someone who begins taking it at 66, is 50% of what the spouse whose account is used is receiving.

Social Security Mistakes That Can Be Fixed
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Underutilized Programs are Out There

Consider the following lesser-known programs:

Social Security's Survivors--this program is most commonly accessed by surviving spouses and ex-spouses. Children under age 19 and dependent parents age 62 and older can also be the recipients.

Social Security Disability There is no minimum age to receive disability benefits, but a minimum number of years worked is required to determine eligibility. The minimum number of years worked increases with age from at least two years of work at age 30 to at least 9.5 years at age 60.

SSDI pays ongoing benefits to people of any age who are considered unable to work due to physical or mental limitations. In 2013, 11 million people collected in this program.
Supplemental Security Income (SSI)--payments are made to individuals with minimal net worth who are either over 65, disabled, have no other sources of income.

Social Security Benefits You Don't Know About
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Protect Your Spouse and Assets

Having one spouse delay Social Security until age 70 may ultimately help the survivor. John Piershale, wealth advisor at an eponymous planning firm in Crystal Lake, Ill shared one instance, "Where we encouraged the husband to start Social Security at age 70 instead of 62." The husband died after claiming at age 70.

"His widow's Social Security survivor's benefit was $3,168 a month," says Piershale. "If the husband had claimed at age 62, her survivor's benefit would have been only $1,980 a month. Because the husband waited, the widow benefitted financially."

Social Security: Boost Benefits for Surviving Spouses
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Those Working While Collecting Will See Less Green

Clients that need to collect Social Security while working and/or before full retirement age will see their work income decrease the amount in benefits that they get, at least temporarily.

Every two dollars they earn over $15,720 (the figure for 2015) equates to a dollar in benefits withheld. For example, if one makes $25,720, they would be $10,000 over the limit and $5,000 of their Social Security benefits would be withheld.

However, benefits are adjusted further down the road.

Income Adjustment: Tapping Social Security While Working
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Despite Incentives to Defer, A Large Percentage of Clients Will Begin Collecting Social Security at Age 62

1% of men and 2% of women wait until age 70 to collect, despite the increase in payment if they wait until then.

Clients cited the need to tap into their money and fear that Social Security wouldn’t be around as prime reasons for collecting at age 62.

Social Security: The Best Cheap 'Annuity' Option
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