Get the Most From Social Security

Who: Alan and Frances Newman
Where: Carlsbad, Cal.
Question: What's our best strategy for taking Social Security?

The Newmans know a lot about the gauntlet of rules retirees must run to make the most of Social Security. Frances, 66, a retired bank loan officer, took benefits as soon as she could, at age 62, knowing full well that it meant taking 25% less than if she had waited until age 66. Like clockwork, $900 pours into her bank account every month.

Alan is a year older and, because they don't need the money for day-to-day living (he has a solid retirement plan from his longtime employer), he plans to wait until age 70 to claim his benefits, racking up four years of delayed-retirement credits. That means he'll get 32% more than if he had claimed at age 66 -- about $3,000 a month instead of $2,300. But that doesn't mean the retired homebuilder and grandfather of four is forgoing benefits until then. During the intervening years, he's collecting a "spousal benefit."

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This strategy often pays off for married couples. Once you reach full retirement age (66 for those born between 1943 and 1954), you can file a restricted application to claim spousal benefits while allowing your own benefit to grow. Alan is receiving about $600 a month based on Frances's record.

Is there a better way? But he wonders whether there's an even better strategy. What if he filed for his own benefit and immediately suspended his application? Would that tactic make Frances eligible for a spousal benefit based on Alan's record? If Frances then suspended her own benefit to capture delayed-retirement credits until she's 70, would that overcome the 25% reduction in benefits triggered when she originally claimed at age 62?

For answers, we turned to our partners at Kiplinger's Social Security Solutions, which offers a powerful online tool to help those approaching retirement to optimize lifetime benefits.

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William Meyer, the founder of the firm, has spent years studying the ins and outs of Social Security. He says that Alan's plan could be a winner, but it would come at a heavy initial price.

Although Frances could put her benefits on hold to earn delayed-retirement credits, she wouldn't be able to claim a spousal benefit. Once you claim your own benefit, you can't exchange it for a spousal one. So the Newmans' plan would involve forfeiting the $900 a month Frances now receives to boost her payments by about $200 a month once she later restarted benefits.

Whether that would pay off depends on how long the couple live. According to Meyer's calculations, if both Alan and Frances live for about another 16 years, the pumped-up payouts would more than make up for the loss of benefits over the next few years.

But given the steep upfront cost and long payback period, Alan now thinks the proposed change in strategy is a nonstarter. He'll stick with the current arrangement.

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Still, Meyer commends Alan's resolve to hold off filing for his benefit until age 70. Not only will he get bigger checks, but if he dies first, Frances will get the largest possible survivor benefit.