When it comes to trying to figure out the best way to file for social security benefits, without leaving money on the table, even brilliant economists, financial experts and seasoned financial journalists need help too. As pointed out in a New York TImes (NYT) article on March 13, 2015 entitled, "The Social Security Maze and Other U.S. Mysteries", the social security system is enormously complex and difficult to figure out, even for so called "smart people".
In this NYT article, Larry Kotlikoff (a Boston University Economist) describes how he made a game of approaching smart people whom he knows and convincing them that they were leaving tens of thousands of Social Security dollars on the table.These friends included an M.I.T. economist as well as a veteran writer and retirement expert.
In these two cases, Mr. Kotlikoff was able to show them, through the use of relatively simple but little known social security filing strategies, that one was eligible to receive an additional $50,000 and the other an additional $100,000 in benefits. They were both shocked and amazed that such rules existed to provide these additional benefits.
And there in lies the problem. Like most government programs, the level of complexity in the social security systems is so substantial that you need specialized knowledge in order to figure out how to maximize your benefits. There are 2,728 rules that govern social security and the typical couple has over 567 possible filing strategies.
Mr. Kotlikoff and two of his colleagues felt compelled to write a new book, as mentioned in the NYT article, to assist people in trying to sort their way through this maze of social security rules and regulations. I have read the book and it is very good but, like Larry, I felt that there is something fundamentally wrong with a system that requires us to seek specialized assistance just to obtain the benefits that we have earned and are entitled to receiving. Books and software are useful, if not necessary, but for many the likelihood that you will obtain your maximum social security benefits may end up to be, as Mr. Kotlikoff put it, "...simply based on their (perhaps random) access to those who have a deep understanding of the rules".
Like Mr. Kotlikoff, we at NSSP started our firm to meet the growing demand by baby boomers to understand their options regarding social security benefits. We look to identify filing strategies that provide our clients with maximum benefits as well as customized strategies that integrate their social security benefits into their overall retirement plan in a tax efficient way.
We also saw the value in working with our client's CPA, attorneys, wealth managers, insurance professionals and the other professional advisors so that we are all on the same page and coordinating our advice to develop an overall retirement plan for the client.
For the vast majority of Americans, social security is their largest (and often only) retirement asset. Your decision on when and how to file for benefits may be your most important retirement decision. As Mr. Kotlikoff has clearly pointed out, even "smart people" need advice when it comes to social security due it's enormous complexity.
Ash Ahluwalia, NSSA, CCSCA, MBA