Q: I am mad. A good friend of mine, a neighbor lady who had been single all her life, recently died at 69. She was working up until the time of her death.
Even though she had been eligible for Social Security since age 66, she never filed for benefits because she went to a seminar sponsored by a local financial planner several years ago and the guy convinced her to wait until age 70 to claim her Social Security. (I know about this because I went with her to the seminar.) He told everyone in the audience that they would be foolish to take any Social Security before age 70 because he said they would be financially ahead in the long run to wait as long as possible to file.
Well, look what happened to my friend. I called the guy who put on the seminar and told him he gave us bum advice. He said he still thinks his advice was sound. I wish I could get a list of everyone who was at that seminar and tell them this story.
What I want to know from you is if I can file a Social Security claim for her now after her death and use some of the proceeds from whatever back pay she might be due to cover her funeral and other after-death expenses I incurred.
A: There are two issues that need to be addressed. First, the answer to your specific question is no. Assuming, as you said, that she never filed any kind of claim for Social Security benefits, then there is nothing you can do now. Sadly, this lady missed out on tens of thousands of dollars in Social Security benefits she could have been paid between age 66 and her death.
The bigger issue is whether people are ahead to delay benefits until age 70. And that is a question no one can really answer, because no one knows when he or she is going to die.
I don’t necessarily think the financial planner gave you and your friend “bum advice.” But if he did, as you say, tell people “they would be foolish to take any Social Security before age 70,” then he probably went a little too far. What he should have said is that statistically, most people will live long enough to come out ahead somewhere in the distant future by delaying Social Security benefits until age 70, at which point they get their full benefit plus a delayed retirement bonus of 32 percent per month. But then he should have told his listeners that they have to consider their own financial situation and their own health matters before deciding to wait until age 70 to claim their first Social Security check.
I’ve marveled many times (mostly in bewilderment) at the high number of retiring baby boomers who are trying too hard to squeeze every last nickel out of their Social Security benefits. I caution them that they really need to think things through before giving up so much money (the benefits they would be due between ages 66, or possibly even age 62, and age 70), hoping they will live beyond their mid-80s to come out ahead in this Social Security gambling game they are playing. Sadly, your friend is a good example of someone who lost that gamble.
My wife and I each took our Social Security benefits at age 62. I can hear financial planners and Social Security maximizing specialists gasping for air as they read that.
My wife is currently pushing age 70. (She’s a few years older than me.) That means she’s been getting Social Security checks every month for almost eight years.
Let’s say she’s averaged getting $1,200 per month for the last 96 months. That’s $115,200 she has received between age 62 and 70. Had she waited until age 70 to start her benefits, she’d probably be due about $2,100 per month, or $900 more per month than she is getting now. That’s a decent sized chunk of change, no doubt. But it would take her 128 months, or about 11 years, to make up for the money she would have not received between 62 and 70.
In other words, by age 81, she would have won the Social Security “game” had she waited until age 70 to start her Social Security.
My wife comes from a long line of women who’ve lived into their late 80s and early 90s. So chances are she will live well past age 81 and probably would have been better off to wait until age 70 to claim her monthly benefits.
But here’s the deal: She doesn’t care. We have been having way too much fun these past eight years spending her (and my) reduced Social Security checks. We’ve taken that $115,200 and traveled all around Europe. We have made many nice trips from one end of this country to the other. We’ve bought several new cars.
I don’t want to imply that we are rich. We certainly are not. But we made a decision to take our Social Security benefits early and we are living our lives to the fullest. We are not worrying one little whit about whether we made the right Social Security decision. And we certainly are glad we never attended a seminar in which we might have been pressured to delay our benefits until age 70.
Having said all that, I must point out that there are quite a few well-to-do retirees who have so much other income and resources in retirement that filing for Social Security benefits puts them in an uncomfortable tax position.
Those really rich folks might be ahead to delay filing for Social Security until age 70. So if you’re so well off that Social Security is just a tax burden for you, then go ahead and delay those benefits, and you’ll have even more money to worry about in your 80s.