RETIREMENT INCOME


The Secret Is Out on Social Security

Donald McCarren knows a thing or two about money. After all, he directs the MBA program at Lincoln Memorial University, in Harrogate, Tenn. But he didn't know that his 5-year-old daughter, Alexa, was entitled to Social Security benefits worth up to half of his monthly check until she reaches age 18.

Nor did his accountant, his estate attorney or "a very successful money manager," who happens to be his son. But then McCarren read Secret Ways to Boost Your Social Security.

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The article noted that minor children of older men such as McCarren, 68, are entitled to monthly benefits when a parent begins collecting Social Security. "I went to the Social Security office," he says, "and was told that my daughter was entitled to $1,068 per month and that the benefit was retroactive."

McCarren and his wife, Anoula, 42, have already received a check for more than $40,000. He estimates that over the next 12 years, the added benefits, which he plans to invest for Alexa's college education, will be worth more than $250,000. "We were just amazed," he says. "It's almost too good to be true."

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Claiming spousal benefits. Many two-career couples assume they will claim Social Security based on their individual work records. They tend to dismiss spousal benefits (worth 50% of the worker's benefits) as a throwback to the good old days of Leave It to Beaver. But several readers of the July story -- among them Tom West of Minneapolis -- were astonished to learn that if they applied for benefits at their normal retirement age (which is 66 for anyone born between 1943 and 1954), they could restrict their application to spousal benefits and delay collecting on their own record until later, when their benefits would be worth more. Depending on your birth year, your retirement benefit increases by 7% to 8% for every year you delay collecting, until age 70.

For Tom and his wife, Kathleen, the surprise benefits translate into nearly $700 a month in extra income. Kathleen, a former nurse, started collecting at 62. But Tom, 66, a theology professor, plans to keep working for at least four more years. "Until I read the Kiplinger's article, I never dreamed that I could draw spousal benefits," says Tom. "I submitted my application, and within ten days I had received a check for $2,760 retroactive to February, when I reached my full retirement age."

By the time Tom applies in four years for his own retirement benefits, they will be worth about $2,300 a month -- 28% more than what he could collect today. "That's like earning 7% a year on an investment, and it's hard to get 7% a year anywhere else," he says.

And by waiting until age 70 to collect a larger retirement benefit, Tom also dramatically increases the survivor benefit that his wife would receive. Although Kathleen began collecting at 62, which reduces her retirement benefit by 25% for the rest of her life, she would still receive a full, unreduced survivor benefit -- worth 100% of what Tom receives -- if he dies before her because she has now reached her normal retirement age.

Tom is thrilled with his windfall, but it didn't come easy. When he applied for spousal benefits online at the Social Security Web site (www.ssa.gov), the agency misinterpreted his request and processed his claim for benefits on his own record. So he withdrew his application and tried again in person at the local Social Security office. "You have to be persistent," Tom warns. "Three SSA agents gave me totally wrong information. If you're not well informed and certain you are correct, you can easily be defeated after a few phone calls." Our article also brought peace to the Barra household in Dania Beach, Fla.

"My wife was pressuring me to collect Social Security so she could collect her spousal benefits," says Gerald Barra, 66. But Gerald, an engineer, would like to delay collecting benefits until 70. Normally, you can't collect spousal benefits until the primary worker files for Social Security. But after reading the article, Gerald realized that he could "file and suspend" -- apply for retirement benefits now, allowing his wife, Patricia, to collect spousal benefits, and then immediately suspend his own application so he can accumulate delayed-retirement credits. As a result, the Barras will boost their household income by about $12,000 a year.


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