Social Security is the foundation of America's retirement system, a near-universal safety net against the risk of running out of money in old age. For the typical worker, the most important decision they make when it comes to retirement finances is when to file for Social Security benefits.
For example, the payoff from waiting is large (perhaps the least popular theme of this column). The earliest age for filing is sixty-two years old, but Social Security benefits are more than 75 percent higher if you wait until at age 70.
The pay-to-wait calculation is relatively straightforward. But Social Security is remarkably complex and financial reward to understanding the system's nuances potentially ample. That's the persuasive perspective of a new book, "Get What's Yours: The Secrets to Maxing Out Your Social Security," by Laurence J. Kotlikoff (economist), Philip Moeller (journalist and research fellow) and Paul Solman (journalist).
The book was conceived after a bout of tennis between Boston University economist Kotlikoff and Solman, business and economics correspondent for the PBS News Hour. Kotlikoff wondered when Solman and his wife planned on taking Social Security. Solman confidently replied, we have it figured out. They would wait until age 70 to file, a few years from then. Kotlikoff started delving into the details of spousal benefits, the tactic of applying for benefits and suspending them, and so on. Four years later, Solman and his wife have started taking their maximum benefit but, in the meantime, they collected nearly $50,000 they were entitled to — yet knew nothing about—until that tennis game.
The book is built around three general rules: Be patient (wait to collect as long as possible); apply for all that is yours; and get the timing for filing right. Good advice. The devil is in the details and the authors do a good job dealing with many different circumstances, including married couples, gay couples, never married, divorced and widowed. There is something of an odd chapter at the end laying out their personal perspectives on Social Security's future. Solman and Moeller argue modest reforms are sufficient. Kotlikoff predicts an inevitable Armageddon.
However, the real value book lies in the author's efforts to ensure that you understand your options for maximizing your benefit when the time comes. It isn't an easy task and "Get What's Yours" tackles the complexity well.
Chris Farrell is economics editor for "Marketplace Money." His e-mail address is firstname.lastname@example.org.