Mary Beth Franklin: Jumping the gun on Social Security a big mistake

I feel like I've created a monster! For the last several years, I've have been trying to get the message out to consumers and financial advisers that there are ways to increase lifetime Social Security benefits depending on how and when you claim them.

The increase-your-benefits message is resonating with InvestmentNews readers and viewers of the PBS program WealthTrack where I have discussed these strategies at length (and receive loads of e-mails every time the program is repeated).

The timing part of my message seems to be falling short.

Repeat after me: 66 is the magic age (assuming you were born from 1943 through 1954). If you were born after that, your normal retirement age—and your magic number—are higher.

I recently received an e-mail from Bill and Janet. They are both 63, married to one another and they each have their own business. Their retirement benefits at normal retirement age are similar: $2,335 per month for Janet and about $2,275 per month for Bill. If they delayed collecting until age 70, their maximum benefits would increase to about $3,000 each.

“Should we both file for Social Security benefits immediately, with my wife suspending her benefits until age 70 so I could file for spousal benefits only?” asked Bill. “That way we could both collect our maximum benefits at age 70, right?”

Their coordinated strategy is sound, but their timing is off. To exercise this combo strategy, they both must wait until their reach their normal retirement age of 66 to file for benefits. At that point, one spouse could file and suspend, triggering spousal benefits for the other.

That means Bill could collect half of Janet's benefit--worth about $14,000 per year--at 66. At 70, he could switch to his own retirement benefit and Janet could start collecting her. Together, they would collect about $72,000 per year in Social Security benefits and those maximum benefits would serve as a larger base amount for future cost-of-living adjustments.

But remember, 66 is the magic age. File for benefits before then and you forfeit your right to use this creative combo strategy.