Several sources now provide sophisticated online services to help decide when and how to claim Social Security benefits; some of the services are free, such as AARP and T. Rowe Price. Other services charge a fee:
§ MaximizeMySocialSecurity.com (very flexible)
§ SocialSecuritySolutions.com (easy to use)
The Public Broadcasting Service website publishes articles written by Laurence Kotlikoff, an economics professor at Boston College, about a wide range of Social Security topics. The articles are published on Mondays. Listed below are some misconceptions about benefits.
Earnings Test (if you work during retirement)
If you are younger than your full retirement age (FRA) and have earned income, your Social Security retirement benefits will be reduced by $1 for every $2 you earn above an annual limit. For 2014, the limit is $15,480. After you reach full retirement age, the penalty completely disappears.
What many investors and clients do not know: Money lost during this period (the reduction in benefits) is recouped. Once you reach full retirement age, Social Security recalculates your benefits to include any penalty dollars withheld. Over your lifetime, your total benefits will be the same whether or not you work after retirement.
Spouses: Be Aware of at Least 3 Claiming Strategies
Claiming benefits before your full retirement age (FRA) could result in your spouse locking into a low survivor benefit when you die. The longer you wait to claim your initial retirement benefits, the better the survivor benefits.
Once you reach FRA, a second strategy is to claim and suspend benefits (stop the first payments); this results in two benefits:  at age 62+, your spouse can begin collecting spousal benefits (assumes this is > the spouse’s work record benefit); and  your own benefit will later increase in size (see below).
A third strategy to consider is to claim a spousal benefit, then later claim your own benefit (assumes you have a work record). At FRA, you can claim either a spousal benefit or your own benefit. If you start by claiming the spousal benefit, you can later change to your own benefit—which will have increased in size due to the delay.
Spousal Filing: Watch Out
Something most couples will want to avoid is the situation wherein one spouse is already collecting benefits and then has the other spouse take benefits before FRA (perhaps as early as age 62). By doing this, Social Security’s position is the other (younger) spouse has filed for both benefits: one based on her work record and one based on being the spouse of a worker.
The result is the younger spouse will receive the larger of the two monthly benefits, but will be locked into a reduced lifetime benefit. What should have been done in this example was: Have the younger spouse wait until their FRA; this would then give the younger spouse the flexibility of starting with a spousal benefit and then switching to their own benefit a few years later.
Divorced Spouses and Surviving Spouses
When in doubt, ask Social Security if you are eligible for a benefit. There are huge numbers of ex-spouses, widows, and widowers who do not think they are eligible for benefits—but are. If there is a divorce or spousal death, contact Social Security immediately to learn about your possible benefits. If you have any children, let Social Security know.
Delayed Benefits: Two Possible Tax Benefits
As much as 85% of Social Security benefits are subject to income taxes; whether the subject amount is 0%, 50%, or 85% depends upon marital status and MAGI. Delaying benefits means you are not subject to these tax rules and it may also make tax sense later.
For example, some individuals and couples have retirement accounts; for most of these non-Roth accounts, all withdrawals are subject to ordinary income. If someone delays Social Security benefits and takes money out of a traditional IRA or pension, that person or couple might be in a very low tax bracket—making such withdrawals tax efficient. One or multiple years later, it may then make sense to minimize such withdrawals and then rely on Social Security checks.
One of the better web sites for explaining certain Social Security filing strategies is run by Fidelity; go to fidelity.com/viewpoints/