Many retirees depend on Social Security for the bulk of their retirement income, yet there are many features and options within the program that individuals don't know a lot about. Unfortunately, in my experience, the employees of the Social Security Administration (SSA) designated to guide beneficiaries often don't seem to be much better informed.
I recently called the SSA to clarify a few issues but gave up after being told the waiting time would be an hour. I then called later in the week, and after I waited for half an hour, the representative was unable to answer all my questions. I was able to obtain answers by contacting Andy Landis, the author of "Social Security, the Inside Story" (available at andylandis.biz), a comprehensive book I recommend highly.
After reading Landis' book, I thought it might be interesting to compose a true-or-false quiz for readers.
Hopefully, it will alert you to what you might not know -- which can cost you money.
TRUE OR FALSE?
Once you start receiving monthly Social Security payments, you can change your mind and elect to receive higher benefits later.
True, in some circumstances. You can change your mind, as long as you do it within a year after you start receiving benefits and you repay all the income you received from Social Security. You may do this only once. This may be beneficial if your financial situation changes suddenly if you get a new job, for instance -- and you prefer to postpone benefits for higher income later.
If you apply for Social Security before your full retirement age and are penalized because you earned more than the earnings limit ($15,480 in 2014), you can never recover the lost income.
False. After you reach full retirement age, the Social Security Administration will adjust your penalty, and you will receive a higher payment. For example, if you lost 12 months of income because of above-limit earnings, it will adjust your penalty by the one year you did not receive payments.
If you delay receiving benefits past your full retirement age (up to age 70), in order to receive an extra 8 percent a year in benefits, your spouse must also delay claiming spousal benefits.
False. After you reach your full retirement age, you can "claim and suspend" up to age 70, and you will accrue an additional 8 percent benefit annually. Meanwhile, your spouse can claim spousal benefits as early as age 62 (up to 50 percent of your benefit, or primary insurance amount, when he/she reaches FRA) without affecting your benefit bonus.
If your spouse is eligible for Social Security benefits based on her work record, she should always file for benefits based on her work record when her full retirement age is reached.
False. There are circumstances when filing for benefits at full retirement age on the basis of work record can result in thousands of dollars of potential lost benefits. Consider this case: A husband is eligible for benefits of $1,000 a month at full retirement age (66) and his wife is eligible for $600 a month. The wife could file for spousal benefits and receive $500 a month. By delaying benefits based on her work record, her benefit amount will increase 8 percent for every year she waits. In four years, at age 70, she can then file for benefits based on her work record and receive an additional $2,304 a year ($192 more a month than her $600 full retirement age benefit) for the rest of her life.
If you use the "claim and suspend" option, you can never change your mind, and receive the additional benefit you would have earned between full retirement age and age 70.
False. You may change your mind and "unsuspend." You can unsuspend any time before age 70, and elect a lump sum for any or all of the months subsequent to when you elected to suspend. Assume you suspended at age 66 after reaching your full retirement age, with a primary insurance amount of $1,500 a month. Just before you reach age 70, you unsuspend and request a lump sum for all payments you missed. You would receive a lump sum of about $72,000. If you execute this option, you would receive only $1,500 a month from then on, surrendering the 8 percent a year bonus. You also could take a lump-sum payment for part of that period and a benefit bonus for the rest. For example, you might take a lump sum for two years, which would allow you to receive an additional benefit of $240 a month for the rest of your life.
If you answered all of the questions correctly, congratulations. You are better informed than the Social Security Administration representative I talked to. If you answered one or more incorrectly, consider reading Landis' book. Poor decisions can cost you thousands of dollars. If you are exploring special claiming options, make sure your representative is well-versed.
Elliot Raphaelson is a financial columnist for Tribune Content Agency.