7 Little Known Social Security Benefits

Adapted from 7 Little-known Social Security Benefits by Jennie L. Phipps, bankrate.com

In the first season of “Friends”, Rachel Green looks at her first paycheck as a waitress and asks, “Who’s this FICA guy, and why is he getting all my money?”

That’s one hard lesson about Social Security. Another is that when it’s time to claim, you can’t depend on the Social Security Administration to be your personal advisor. So that means you are on your own to make the most important financial decision of a lifetime. You have to read the rules and do the research yourself.

Here are 7 benefits to brush up on that are not commonly known:

One. There are many ways a married couple can decide to take their Social Security benefits. It’s hard to beat waiting until you’re 70 to begin benefits because the monthly payment is 76 percent higher than it would be if you had started to take benefits at 62, and 32% higher than it would be if you claimed at age 66.

Two. On the other hand, some people advocate drawing at the first opportunity because there is a possibility of losing the bet and getting nothing. If a person waits until 70 to claim and lives to at least age 90, he’ll accumulate almost $162,000 more in benefits than he would if he had claimed at 62. Retired law professor and Social Security expert Merton Bernstein says the longevity bet odds are bad, so claim early.

Three. If you were married for at least ten years, you can stake a claim on up to half of your ex-spouse’s earnings and collect Social Security benefits based on their earnings, if theirs were higher.

Four. If you haven’t remarried, once an ex-spouse passes away, you’ll be treated just like a widow or widower. If you are at least 60, you’ll be able to collect your late-spouses benefit and allow your own benefit to grow unclaimed until you reach age 70, when you can switch if your own is higher.

Five. There is a difference between widow/widower benefits and spousal benefits. As a widow/widower, for example, a widow can begin drawing a survivor benefit on her late husbands Social Security as young as 60, but only at a reduced rate. She will leave her own benefit alone, allowing it to grow and then switch over to her own at full retirement age so she collects more. You can’t do that with spousal benefits.

Six. When you apply for Social Security Disability Insurance, they don't tell you that your first step ought to be to hire a lawyer or other expert adviser. An applicant can have representation from the very beginning of the application process, which is not something that SSDI makes clear.

Seven. 35 years is the magic number. Your Social Security payment is figured using a complex calculation based on a 35-year average of your covered wages. Each year’s wages are adjusted for inflation before being averaged. If you worked longer than 35 years, the government will use the highest 35 years. If you worked for less than 35 years, they’ll average in zeros for the years you are lacking. You don't have to be a math wizard to figure out the impact of that - it drags down your average. If you can avoid zeros by working a couple of years longer, you’ll increase your Social Security payment.

To find a simpler explanation of how your benefits are calculated, visit My Retirement Paycheck.org.

For more information on Social Security, visit www.ssa.gov.