Dear Liz, My husband is 65, I am 63 and we have both stopped working. My teacher's pension is more than adequate for our lifestyle and financial needs. We have retirement savings of $500,000. Neither of us has applied for Social Security. We are considering having my husband apply for benefits now and immediately begin to start investing them. We would like to find a calculator that could show future value of applying for and investing his benefits now versus later, but we can't find one. We plan to set this money aside as our own long-term care insurance fund, since we both have health problems that make us ineligible for this type of insurance. My husband has had a heart attack and this makes estimating his longevity hard to do, as well.
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Finally, although I do have Social Security earnings, they are small and from long ago. With the windfall laws, I would only receive $350-$500 per month in benefits, depending on my age. So I don't think we'll invest mine in the long-term care fund. -- Anita
Dear Anita, People often put too much emphasis on predicting longevity when deciding the timing of their Social Security benefits. You can get so much more by waiting to collect, that most people should delay as long as they can. The difference in benefits can be particularly dramatic for married people. Both of you would have to die relatively soon to make taking benefits early a more lucrative decision than waiting.
Your plan to have a pool of money for long-term care expenses would seem to offer an exception to the rule, but only on first glance. The problem is that you'd have to take significant risk with the money to match the guaranteed gain you'd achieve simply by waiting. Social Security benefits rise nearly 7 percent a year between age 62 and your full retirement age (currently 66). Benefits increase 8 percent a year between full retirement age and age 70, when benefits max out. You may be better off tapping your retirement funds if you need cash for long-term care.
Your situation, however, is complicated by the Windfall Elimination and the Government Pension Offset provisions, which are designed to ensure that people with government pensions don't wind up getting more Social Security benefits than similar workers who don't have such pensions. The Windfall Elimination Provision can reduce Social Security benefits you claim on your own record, while the Government Pension Offset Provision could reduce or even eliminate any spousal or survivors benefits for which you'd be eligible.
Fortunately, more sophisticated calculators -- such as MaximizeMySocialSecurity.com and Social Security Choices -- take these provisions into account when making their assessments. Each costs about $40 to use. You'd be smart to run the results past a fee-only financial planner who could look at your entire financial situation and offer advice.
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