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Work with an expert to explore your Social Security options

| Wednesday, March 13, 2013, 12:01 a.m.

One of the most important assets during retirement is Social Security. Half of all people claim it at age 62. Baby Boomers, who are retiring now, are giving up 25 percent of their lifetime benefits. If you have an income plan that allows you maximize these assets, there are many strategies. You should work with an expert to study your choices. The Social Security Office can answer questions, but they are not allowed to give advice.

One of the main determinations of how much Social Security income you will get is your Primary Insurance Amount. This is calculated when you reach age 62. The Primary Insurance Amount takes the highest 35 years' work wages and combines them with blend points. If you have less than 35 years, Social Security would apply zero for the income of missing years. If you continue to work after 62, the additional earnings could replace some of the zeros or lower earning years. Social Security provides estimates of your Primary Insurance Amount at 66 and 70 assuming you had the same average earnings. Your Primary Insurance Amount is important to a spouse if they are claiming spousal benefits or survivor benefits.

There are different strategies that must be considered. If a husband waits until age 70 to start collecting his benefit, they have grown at 8 percent since full retirement age of 66. After age 70, the benefit does not increase. If the husband passed away at age 71 with a $3,000 per-month benefit, what would his 60-year-old wife's survivor benefit be? Many people would say $3,000. This would be incorrect. She would receive $2,145 or 71.5 percent of his monthly income. This is because she has not reached full retirement age of 66. At that time, she would have received the full $3,000 if she waited.

Some people think that you should file and suspend at age 66 in case your health changes for the worse. While you could apply for back payment to the date you filed, you will not receive delayed credits for the additional years. However, you cannot file for spousal benefits while you have your own account suspended. You cannot have both spouses collecting spousal benefit from each other's accounts at the same time. Also, while you can collect benefits from an ex-spouse if you were married for 10 years, you cannot collect spousal benefits from their Primary Insurance Amount and let yours grow until age 70 unless you are full retirement age.

If a worker, say age 64, lost his job and needed to file for Social Security, he would receive reduced benefits from if he were full retirement age. If after a few months of collecting Social Security, he found a new job, he could notify Social Security and have his checks stopped. If he was able to work the new job until age 66, his Primary Insurance Amount would be higher that he was receiving at 64. It would be a little lower than if had not needed to take the several months when laid off to account for the money that he already received.

Remember, voluntary suspensions can only be done after you reach full retirement age. If a worker takes Social Security at age 62 and then the spouse tries to take a spousal benefit when he or she reaches 62, he/she will not receive half as much. It will be closer to 35 percent. This can have a large effect on benefits over a lifetime when you consider cost of living increases. Make sure that your advisor understands this important topic, or it can cost you a lot of money.

Gary Boatman is a certified financial planner and local businessman who serves as president of the Monessen Chamber of Commerce.