Category Archives: Social Security

How the The Social Security Spouse Benefit Works

SSA-image-3My Comments: Our Social Security system is a vital source of income for the vast majority of us who are age 62 and beyond. If you have a qualified earnings history, by the time you reach age 62 you can elect to start receiving a lifetime annuity, one that has a cost of living adjustment every year.

That’s not to say, however, that understanding all the variables and how they interact with each other, is a simple matter. This is a good start to understanding SPOUSAL BENEFITS and how this critical component may apply to you.

By Dana Anspach – July 08, 2016


1. Who is eligible for a spousal benefit

Both current spouses, and ex-spouses if they were married for over ten years and did not remarry prior to age 60, are eligible for a spousal benefit. You must be age 62 to file for or receive a spousal benefit.

You are not eligible to receive a spousal benefit until your spouse files for their own benefit first. Different rules apply for ex-spouses. You can receive a spousal benefit based on an ex-spouse’s record even if your ex has not yet filed for their own benefits.

2. How much can you get

As a spouse, you can claim a Social Security benefit based on your own earnings record, or you can collect a spousal benefit that will provide you 50% of the amount of your spouse’s Social Security benefit as calculated at their full retirement age (FRA). (Each person’s FRA depends on their year of birth.)

If you file before you reach your own FRA, your spousal benefit will first be calculated as 50% of what your spouse would get at their FRA, but then it will be further reduced because you are filing early.

You are automatically entitled to receive the benefit that provides you the higher monthly amount; either a benefit based on your own earnings, or the spousal benefit, and prior to reaching FRA, Social Security makes this determination for you.

If you were born on or before January 1, 1954, after you reach FRA, you can choose to receive only the spousal benefit, and delay receiving your retirement benefits until a later date, allowing you to receive a higher benefit later based on the effect of delayed retirement credits.

Due to new Social Security laws that went into effect Nov.2, 2015, if you were born on or after January 2, 1954 you will not be able to restrict your application and only receive spousal benefits. For anyone born on or after January 2, 1954, when you file you will automatically be deemed to be filing for all benefits you are eligible for.

3. How early retirement affects things

If you collect a spousal benefit, and you begin collecting this benefit before you reach FRA, your benefit will be permanently reduced. To see how this reduction is calculated visit the Benefits For Spouses section of the Social Security website.

If your spouse takes Social Security early, and you take a spousal benefit early, you will be significantly reducing the amount of benefits that may be paid out over your lifetime and will have permanently reduced the survivor benefit that either of you is eligible for.

Married couples can get more in Social Security payments by coordinating how and when they should each begin collecting benefits. You can run these numbers yourself to see how it works by using an advanced Social Security calculator.

4. When you are a widow or widower

If you are a widow or widower you can collect a survivor’s benefit as early as age 60.

Widows and widowers can restrict their application to file for either their own benefit or the widow/widower benefit, and then later switch to the other benefit amount. You might do this if your own benefit amount at age 70 would be larger than your widow benefit. You could claim the widow benefit for several years, and then at 70 switch to your own benefit.

Once you and your spouse are receiving Social Security benefits, upon the death of your spouse, you will continue to receive the larger of your benefit, or your spouse’s, but not both. This means if you have a longer life expectancy, and you are collecting a benefit based on your spouse’s earnings, if your spouse starts taking Social Security early, it will result in a significant reduction in your benefit too, and the reduction will last throughout your life expectancy.

A surviving spouse living in the same household is eligible to receive a one-time lump sum payment of $255 upon the death of their spouse.

When married couples choose to maximize the highest earning spouse’s benefit by having that person delay collecting until age 70, it acts as a powerful form of life insurance. In many cases it provides the equivalent of $50,000 – $250,000 of life insurance benefit.

Overall, married couples in particular, can make better Social Security choices by working together and making decisions that maximize their spousal and survivor benefits. Too many couples overlook this, and end up getting less income.

Understanding Social Security Spousal Benefits

SSA-image-3My Comments: these details were found at a site called WiserWomen.com . They are consistent with my thoughts about how to get the most from the Social Security system as you ask questions to find the optimal timing to apply and possibly suspend your benefits. If you want a personal analysis and comprehensive report, talk with me. Their comments follow this first paragraph.

Social Security is a vital source of retirement income for most women. For this reason, it is important to understand how the spousal benefit works and how it can impact the amount of Social Security income you receive. While this fact sheet is written for women, the information here is the same for men who may want to claim the spousal benefit based on their wife (or ex-wife’s) earning record.

As a spouse, you can claim a Social Security benefit based on your own earnings record, or collect a spousal benefit in the amount of 50% of your husband’s Social Security benefit, but not both. You are automatically entitled to receive whichever benefit provides you the higher monthly amount. In order to qualify for Social Security spousal benefits, you must be at least 62 years old and your husband must also be collecting his own benefits. If your husband is of full retirement age and is not yet collecting benefits, he can apply for retirement benefits and then request to have the benefits suspended and receive delayed retirement credits until age 70. Once he has applied for and suspended his benefits, you would then be able to apply for spousal benefits. Additionally, if you are the higher earner, your husband can apply to collect spousal benefits based on your work record. It is important to note that claiming a spousal benefit does not impact the benefit amount received by the worker whose earning record is being used.

Taking Benefits Early

A full spousal benefit is worth 50% of the non-claiming spouse’s retirement benefit at their full retirement age (known as the “primary insurance amount”, or PIA). It does not matter when the non-claiming spouse actually filed for their own retirement benefit. Therefore, even if your current or former spouse is receiving a reduced benefit as a result of early claiming, your spousal benefit will not be affected. What CAN impact your spousal benefit, however, is if YOU claim the benefit before your own full retirement age. For example, if your full retirement age were 66, then the following reductions to benefits would apply:
• At age 65, you would receive 45.8% of your spouse’s benefit.
• At age 64, you would receive 41.7% of your spouse’s benefit.
• At age 63, you would receive 37.5% of your spouse’s benefit.
• At age 62, you would receive 35% of your spouse’s benefit.
It is also worth noting that unlike delaying your own worker benefit, there is no credit for delaying a spousal benefit beyond full retirement age.

Divorced Spouses
You can receive benefits as a divorced spouse on your ex-husband’s Social Security record, even if he has remarried and his current wife is collecting benefits based on his record. However, there are a few eligibility requirements:
• You must have been married to your ex-husband for at least 10 years.
• You must be at least 62 years old. However, if your ex-husband is deceased and you are currently unmarried, you may collect benefits as early as age 60 as a surviving divorced spouse. If he is deceased and you are disabled, you can collect benefits as early as age 50.
• Your ex-husband must be eligible for benefits. If he is eligible but is not currently receiving benefits, you can still qualify for spousal benefits if you have been divorced for two or more years.
• You must not be currently married. If you remarried and your second husband is deceased, you can claim benefits from either your first or your second husband as long as each marriage lasted at least 10 years.

Surviving Spouses
• If your husband passes away, you can collect survivor’s benefits as early as age 60.
• You are eligible to receive his full Social Security benefit amount if you claim the benefit at your own full retirement age. If you claim before your full retirement age, your benefit will be reduced. (You can learn more about this on the Social Security website by clicking here.)
• If your ex-husband is deceased and you remarry before age 60 (or 50 if you are disabled), you cannot receive survivor’s benefits unless the latter marriage ends (whether it be through death, divorce, or annulment). If you remarry after age 60, you can continue to receive benefits on your former husband’s Social Security record. However, if your current husband is also a Social Security beneficiary and you would receive a larger benefit from his work record than you would from your former husband’s record, you should apply for spousal benefits on your current husband’s record. You cannot receive both benefits.
• Regardless of your age or marital status, if you are caring for your deceased husband’s child or children, you would be eligible to receive benefits for raising them until they are 16 years old. These children can then continue to receive benefits based on your husband’s work record until they are 18 or 19, as long as they are unmarried. If a child is still a full-time student (no higher grade than grade 12) when they turn 18, they can continue to receive benefits until 2 months after they turn 19 or until they graduate, whichever comes first. Children who are disabled can also continue to receive benefits after they turn 18 years old.

Applying for Benefits
You can apply for benefits online by going to http://www.socialsecurity.gov. You can also apply over the telephone by calling 1-800-772-1213, or apply in person by visiting your local Social Security office. For more information on how to apply, visit www.socialsecurity.gov/retire2/applying8.htm.

To make the application process easier, you should know your husband’s (or ex-husband’s) date of birth and Social Security number. You may also be asked to provide certain documents as proof of eligibility, such as your birth certificate or other proof of birth, naturalization papers, W-2 forms, a marriage certificate, or divorce papers if you’re applying as a divorced spouse.

Social Security: What to know before claiming benefits

SSA-image-3My Comments: This is pretty basic stuff but for many of you who have yet to seriously think about where the money is going to come from when you retire, this is a must read. I also encourage you to go to the ssa.gov web site and register yourself.

by Diane Archer June 30, 2016

The National Academy of Social Insurance has a new toolkit on Social Security. If you’re thinking about when to claim Social Security benefits, it explains what to know and ask.

When to claim Social Security benefits is an important decision. If you need the benefits in order to meet your daily needs, you should claim them as soon as possible. But, if you can wait to claim them, you will receive higher Social Security income. As it is, on average Social Security replaces only 40 percent of a person’s pre-retirement income.

If you were born between 1943 and 1954, your full retirement age (FRA) is 66, though you may claim benefits any time between age 62 and 70. If you claim them at 62, you get 25 percent a month less each month for your lifetime than you would if you waited to claim until you are 66. To learn about how claiming benefits early disproportionately hurts people with low incomes, click here.

If your full retirement age (FRA) is 66 and you wait until 70, you get 32 percent more in monthly benefits for your lifetime than you would if you claim benefits at 66. You get 8 percent more for each year you delay claiming benefits after age 66 up to age 70.

Of course many factors go into when you should claim benefits. If you’re in good health and can wait, you will ensure a higher monthly income throughout your life. Moreover, if you’re married and earn more than your spouse, delaying your receipt of benefits, will ensure increased Social Security income for your spouse after you pass. On the other hand, if you’re in poor health, it might be wise to claim benefits early so you are able to get back as much as possible from Social Security.

It’s wise to confirm that Social Security has correct information about your income. You can check online by creating a “my Social Security account” at https://www.ssa.gov/myaccount/. Once you do that, you will get a Social Security Statement that shows the income information Social Security has on file. Let Social Security know right away if you find a mistake.

What benefits does your spouse get? Because Social Security is insurance designed to protect families, your spouse, even your divorced spouse if you were married at least ten years, is entitled to Social Security benefits based on your income. The spousal benefit amount is half of the amount of your benefit if that amount is larger than what your spouse would receive based on his or her own income. And, after you pass, your surviving spouse or divorced spouse if you were married at least ten years, is entitled to your full Social Security benefits if that is larger than the amount your spouse would otherwise get based on his or her own income.

The NASI toolkit provides questions to ask based on a range of situations in which you might find yourself, including whether you should keep working and claim benefits. To read the toolkit, click here.

Social Security Tips for Couples

My Comments: More ideas about the ongoing saga of when and how to best apply for Social Security benefits.

02/24/2016

There are many benefits to marriage, but one you may not yet have considered is the flexibility married couples enjoy when deciding how and when to claim Social Security. Even though the basic rules apply to everyone, a couple has more options than a single person because each member of a couple can claim at different dates, and may be eligible for spousal benefits.

Making the most of Social Security requires some strategy to take advantage of the basic benefit rules, however. After you reach age 62, for every year you postpone taking Social Security (up to age 70), you could receive up to 8% more in future monthly payments. (Once you reach age 70, increases stop, so there is no benefit to waiting past age 70.) Members of a couple may also have the option of claiming benefits based on their own work record, or 50% of their spouse’s benefit. For couples with big differences in earnings, claiming the spousal benefit may be better than claiming your own.

What’s more, Social Security payments are guaranteed for life and should generally adjust with inflation, thanks to cost-of-living increases. Because people are living longer these days, a higher stream of inflation-protected lifetime income can be very valuable.

But to take advantage of the higher monthly benefits, you may need to accept some short-term sacrifice. In other words, you’ll have less Social Security income in the first few years of retirement in order to get larger benefits later.

“As people live longer, the risk of outliving their savings in retirement is a big concern,” Ann Dowd, a CFP® professional and a vice president at Fidelity. “Maximizing Social Security is a key part of how couples can manage that risk.”

Until recently, many couples had additional options known as “file and suspend” and “claim now, claim more later” that are now being eliminated. Before you choose a strategy, be sure to review those options to see if you qualify.

In the absence of “file and suspend” and “claim now, claim more later” strategies, the big question is how long you expect to live. Deferring means a higher benefit, but it takes time to make up for all the payments you skipped in your 60s and to replace the savings you spent in the meantime. But when one spouse dies, the surviving spouse can claim the higher monthly benefit for the rest of his or her life. So, for a couple with at least one member who expects to live into his or her late 80s or 90s, deferring the higher earner’s benefit may make sense. If both members of a couple have serious health issues, claiming early may make more sense.

How likely are you to live to be 85, 90, or older? The answer may surprise you. Longevity has been steadily increasing, and surveys show that many people underestimate how long they will live. According to the Social Security Administration, a man turning 65 today will live to be 84.3 on average and a woman will live to be 86.6 on average. For a couple at age 65, the chances that one person will survive to age 85 are more than 75%.
CONTINUE-READING

What You Should Know About the New Social Security Rules

SSA-image-3My Comments: If you have not yet signed up to receive your Social Security benefits, you would be well served to better understand the rules associated with Social Security. Believe me, it’s confusing to experts like me, much less someone with an aversion to thinking about money. Here’s a start to your journey.

Kristin Wong, June 1, 2016

Social Security is already a hot-button issue, and recent changes have people really freaking out about it, which makes it tough to get past the outrage and just navigate the facts. Here’s what you should know about the changes.

If you’re not familiar with how Social Security works, it’s okay—the program is complicated and frequently misunderstood, but the basics of taking benefits are simple to follow. Last year, the government signed the Bipartisan Budget Act into law, and the bill included some changes to the rules for collecting Social Security benefits. Those changes recently went into effect, and they axed some smart strategies that helped people maximize their benefits.

What’s Changed

If you retire after your full retirement age, you usually get 8 percent more until age 70. In other words, the longer you wait, the higher your payment. The SSA refers to this as delayed retirement credits. Up until recently, married couples used a couple of “loopholes” in the rules to get even more out of these delayed credits. The new changes closed the loopholes and eliminate these strategies.

You Can No Longer “File and Suspend” to Activate Benefits for a Spouse

Known as the “file and suspend” strategy, the loophole allowed married couples to delay one spouse’s benefit while the other spouse received a payout on that same benefit. It’s a little confusing, I know, but here’s how it worked in practice.

Basically, one spouse (usually the one who earned more money) would file for Social Security once they reached their full retirement age. Once they filed, Spouse #2 would then file for a spousal benefit, usually half of the full benefit. Spouse #1 would then suspend the benefit, postponing their own payout and letting their benefit grow 8% every year.

In other words, they file, take the spousal benefit, then suspend. Meanwhile, Spouse #2 gets a check every month, but the main benefit earns interest. You get the best of both worlds.

With the new rules, which took effect May 1st, this is no longer an option for most of us. According to the SSA:
… if you take your retirement benefit and then ask (on or after April 30, 2016) to suspend it to earn delayed retirement credits, your spouse or dependents generally won’t be able to receive benefits on your Social Security record during the suspension. You also won’t be able to receive spouse benefits on anyone else’s record during that time.

When you suspend benefits, you can no longer receive spousal benefits. The new rules don’t apply to people born before April 30, 1950, however. This gives recent retirees a chance to take advantage of the strategy they may have been counting on for income.

No More “Restricted Applications” to Collect Benefits While Sitting On Future Payouts

Along with “file and suspend,” some used a strategy called “restricted applications” to optimize their benefits. Going back to the previous example, this allowed Spouse #2 to receive spousal benefits while delaying their own Social Security benefits, which are separate. This way, both spouses could enjoy the annual 8% increase and still get paid every month.

Not anymore, though. The new rule, which applies to anyone born after 1954, eliminates restricted applications and forces you to take both benefits at the same time. Here’s how the Social Security Administration puts it:
if you are eligible for benefits both as a retiree and as a spouse (or divorced spouse), you must start both benefits at the same time. This “deemed filing” used to apply only before the full retirement age, which is currently 66. Now it applies at any age up to 70, if you turned 62 after January 1, 2016.

So if you apply for one benefit, whether it’s a spousal benefit or your own Social Security payout, you apply for both. Sounds fair enough, but here’s the kicker: you basically only get the higher benefit. The Motley Fool explains:
…that person won’t have the option to collect spousal benefits if his or her own benefit amount is higher. That person will therefore be left with a choice: Start taking benefits and lose out on the 8% annual increase for delaying, or hold off on taking benefits to capitalize on those delayed retirement credits and forego Social Security income in the interim.

That’s not exactly how the SSA puts it, but that’s the gist of what happens and why so many people are up in arms about the changes. Couples could lose out on hundreds or even thousands of dollars every month.

Even though the “Social Security Crisis” is overblown, it’s probably fair to assume that the rules are meant to maintain Social Security funds.

What Hasn’t Changed

People have strong opinions about Social Security. Many of the articles covering the changes seem to imply there’s been a huge overhaul that eliminates basic perks. This isn’t the case—spousal benefits and suspended benefits haven’t been eliminated or even reduced. However, the rules have changed to close some the loopholes that allowed people to really take advantage of those perks. Those changes could make a big difference for a lot of retirees (or soon-to-be retirees).

The most important takeaway, though, is that delayed retirement credits still exist. You still get an annual increase if you delay your Social Security benefits past your full retirement age. And this perk is the backbone for most Social Security withdrawal strategies. In other words, it’s still possible to strategize your benefits and get more out of them.

Your own approach to collecting Social Security depends on your own situation: how much you earn in retirement, when you plan to stop working, how much your living expenses are and so on. The Motley Fool suggests one common strategy, though:
If you want to take advantage of those delayed retirement credits but can’t wait that long to start receiving Social Security income, assuming both spouses worked, you could have one spouse (ideally, the higher wage earner) hold off on taking benefits while the other claims them earlier. This way, you get some income when you need it while allowing the higher wage earner’s benefits to grow.

The SSA also has a handful of calculators that can help you get an idea of what your own benefit amount will be, depending on when you take it and how much you earn.

A New Day for Social Security?

SSA-image-3My Comments: As someone who teaches people how to maximize their social security benefits, a major fear that surfaces during a workshop is whether there is enough in the system to guarantee future benefits.

The quick answer is “not without some changes to the system”, which leads to more questions about when it will run out, and what can we do about it.

The last fundamental change came in 1983. At that time, the system was expected to go broke in two or three years. But here we are, 33 years later, with far more people in the system than ever before, and there is enough money in the system today to last another 20 years.

Since most of my students can expect to live for another 30-40 years, the question of whether they’ll still get a check at the other end is a real question. It deserves a more qualified answer than I can possible deliver. Here is a answer from someone very qualified.

By Stephen Hill, July 11, 2016

The U.S. has entered an anxious era in which fewer workers have a single employer or a regular workplace. Instead they have various employers and multiple part-time jobs and “gigs,” with these businesses not required to provide healthcare, make Social Security contributions or even offer compensation for workplace injuries.

A crucial adaptation to these changing circumstances would be the creation of a portable safety net, one that would make it possible for all workers to go from employer to employer while still retaining access to basic benefits. Social Security — which is already gloriously portable — could play a key role in such a system, but only if we fix it.

Social Security is our most effective anti-poverty program; without it, nearly half of the nation’s retirees would be living in poverty. Three-fourths of retirees depend on it heavily, particularly women and racial minorities. During the 2008-09 economic crisis, moreover, when home ownership, private savings and the stock market collapsed, Social Security remained stable.

The criticism that Social Security will face a financial deficit sometime in the 2030s is overblown. Social Security has an established trust fund that, legally speaking, cannot spend more than it takes in. Any future shortfall could be made up from any number of revenue sources, it’s all a matter of budgetary priorities.

In fact the real problem with Social Security is not a shortfall but that its payout is so meager. Social Security is designed to replace only about 35% of wages at retirement, yet most Americans need twice that amount to live decently. With the other components of the retirement system looking wobbly, and with incomes low, Social Security is too skimpy to be the nation’s single pillar retirement system.

The obvious solution is to expand it. There are numerous revenue streams that would allow the nation to greatly increase the monthly payout for the 43 million Americans who receive retirement benefits. Here are a few recommendations to consider.

First, we should eliminate the Social Security payroll cap so that all income levels pay the same rate. Currently any wage income above $118,500 is not taxed for Social Security purposes. The practical effect of the cap is that billionaire bankers and CEOs contribute a far lower percentage of their income into the Social Security Trust Fund than their secretaries and chauffeurs. Making payroll contributions more fair would raise approximately $135 billion annually.

In addition, we should stop exempting investment income from Social Security taxes. Wealthy Americans make 40%-50% of their money from investment income, and we help fund Medicare by taxing it like wages. If we did the same for Social Security, we could raise an additional $75 billion annually.

Along the same lines, we could scrap income tax shelters for wealthy households and businesses, and then reallocate the savings to the Social Security fund. Loopholes include the drastically lower tax rate for investment income like capital gains, “carried interest” and “step-up in basis,” the latter exclusively benefiting inherited wealth. These tax rules cost the national treasury hundreds of billions of dollars per year.

Lastly, the U.S. could end or reduce tax breaks for private retirement accounts, including 401(k)s and IRAs, and again reallocate the savings to Social Security — which would be far more equitable. Of the $165 billion that the federal government spends subsidizing individual retirement savings, nearly 80% of it goes to the top 20% of income earners. Many of the middle class and poor can’t take advantage of these deductions because they don’t earn enough income to save. (For that reason, a universal 401(k), as has been proposed by President Obama, would be largely pointless).

Just these four revenue streams would come close to raising the $662 billion necessary to double Social Security’s monthly benefit.

Other nations manage to provide retirement benefits at that level, so there is no reason the U.S. can’t. Doing so would create a more secure retirement for everyone, even as it would benefit the overall economy and form a core part of a portable safety net that so many workers need. As the old New Deal crumbles, substantial expansion of Social Security benefits would provide a new kind of deal for U.S. workers.

Steven Hill is a senior fellow at the New America Foundation and author of the recently published “Expand Social Security Now: How to Ensure Americans Get the Retirement They Deserve.”

Will You Regret Taking Social Security ASAP?

SSA-image-3 My Comments: Too many people choose to take early benefits. If you need the money, hate your job, don’t have a job, plan to die soon, or simply don’t have confidence in your life, then maybe it’s OK. But it usually turns out to be a mistake. There is a do over, but you have to take it within 12 months. Most don’t and then when they discover they are 75, there’s not enough money.

By Casey Dowd Published June 30, 2016 The Boomer FOXBusiness

Attention Baby Boomers who will soon be turning age 62 and are planning on taking Social Security benefits early, be sure to do your homework before you sign the paperwork.

A Nationwide Retirement Institute survey of 909 U.S. adults aged 50 or older found that many of those who claimed their Social Security benefits early wish they could change their decision – and the top reason is to maximize their benefit. Meanwhile, of those who wouldn’t change their decision, many say they had no choice – saying they needed the money.

“Social Security is undoubtedly one of the most complex retirement topics facing American workers,” says Dave Giertz, President of Sales and Distribution at Nationwide. “Even those who can identify the factors that will impact their benefit are likely unable to grasp the thousands of rules that apply to Social Security. The complexity makes it extremely difficult for retirees to maximize their benefit on their own.”

Giertz discussed with FOXBusiness.com what you need to know.

Boomer: What impact has claiming Social Security early had on American workers?

Giertz: American workers are potentially missing out on hundreds of thousands of dollars in retirement income by claiming Social Security early. Instead of leaving money on the table, retirees need to consider all of their filing options to help understand how Social Security can fit into their overall retirement income plan.

Maximizing your Social Security benefit is more important than ever because, for most, it is the only source of retirement income. Only 36 percent of future retirees we surveyed have pensions, compared to 54 percent of recent retirees and 60 percent of the oldest retirees. Preparing for retirement holistically by working with online tools and advisors can help retirees face challenges posed by lack of retirement income, health care costs and other obstacles.

Boomer: What surprises typically come up in retirement?

Giertz: Seven out of 10 retirees who have health problems say the problems came sooner than they expected, increasing the impact on their retirement and their wallets. Additionally, almost two in five retirees (37 percent) say health problems keep them from living the retirement they expected.

For many current retirees, health care expenses are eating up a majority of their Social Security benefit. The average American claiming their Social Security at 62 will spend about 61 percent of their Social Security benefits on health care costs, according to a case study comparing data from Nationwide Retirement Institute’s Social Security 360 Analyzer and Health Care Costs Assessment tools. That’s before factoring in long-term care costs.

Meanwhile, according to the same case study, if an average American waits until age 70 to claim Social Security, they have more money left over and end up spending just 47 percent of their benefit on health care costs.

Boomer: How can Baby Boomers project what their benefit will be, so as not to be surprised when they retire?

Giertz: As a start, don’t guess. About a quarter of Americans who haven’t claimed Social Security say they are either guessing or don’t know the amount they will receive in their monthly benefit check. As a result, many Baby Boomers are overstating the amount they might receive. Those approaching retirement say they expect to get $1,610 in monthly Social Security benefits, while in reality recent retirees report their actual monthly benefit is about $1,378, and those who have been retired longer report receiving just an average of $1,185 per month.

Only 11 percent of current retirees used an online calculator to estimate their benefit; however, among Baby Boomers approaching retirement, the use of these tools is becoming much more prevalent. More than four in 10 future retirees (42 percent) have used a Social Security calculator to estimate their benefit.

While the development of Social Security calculators is helping close the Social Security knowledge gap, Americans should work with a financial advisor to create a holistic retirement income plan that includes Social Security. Retirees who work with an advisor are much less likely than those who don’t to say health care costs keep them from living the retirement they expected (11 percent vs. 29 percent).

Boomer: With the increase in the cost of living and inflation in retirement what should future retirees be doing now to support the increase?

Giertz: Nearly two in five Americans nearing retirement (38 percent) expect their living expenses will go down in retirement.

However, changes in the cost of living and inflation are the top reasons expenses increase in retirement, according to the retirees we surveyed. Of those retired 10+ years say the cost of living (79 percent) and inflation (62 percent) are the leading factors impacting their living expenses retirement.

In addition to saving more, maximizing your Social Security benefit is key to coping with cost of living increases and inflation.

Boomer: How can Boomers maximize their Social Security benefit?

Giertz: Eighty-six percent of future retirees cannot correctly identify the three basic factors that the Social Security Administration uses to determine their benefit amount, and, as a result, many retirees do not know how to maximize their Social Security. Understanding how your age, benefit start date and marital status work together to determine the amount in your benefit check every month is a great start.

However, the combinations of different ages, benefit start dates and marital statuses make every individual or family’s ideal filing strategy different – and many Baby Boomers may want to consider a variety of strategies with different benefit start dates.

While life events force many Americans to take Social Security early, those who are willing or able to wait get rewarded for their patience. According to the Social Security Administration, American workers receive and extra 8 percent per year for every year they postpone collecting benefits beyond their full retirement age amount – up to age 70.