Social Security benefits timing more tricky than many realize: Kotlikoff
One of the world's most influential economists talks about Social Security and his new book.
There’s a secret to maximizing Social Security benefits that’s not readily apparent on the agency’s website or by calling its 1-800 number, says Boston University economics professor and author Laurence Kotlikoff.
“For example, if someone has prostate cancer at 68, it can be a huge mistake if they take benefits immediately if they have a wife who didn’t have much of an earnings history,” Kotlikoff says. “By taking benefits early, the husband would be permanently reducing his wife’s survivor benefit by 16 percent.”
When helping clients with Social Security benefit decisions, financial advisors should base recommendations on a myriad of factors within a client’s marriage — age, earnings history, health status of both partners — as well as whether the client also has an ex-spouse who might also be able to get survivor benefits.
“Advisors need to know all the benefits available to clients,” he says. “If clients don’t take benefits exactly at the right time, the benefit won’t be available and will be lost. There are no retroactive benefits that go beyond six months.”
Kotlikoff is also president of Economic Security Planning Inc., which offers financial planning software developed after researching Social Security software code, as well as hiring top software engineers and consulting with actuaries at the Social Security Administration. In 2016, he co-authored the New York Times best-selling book, “Get What’s Yours: The Revised Secrets to Maxing Out Your Social Security.”
Now, Kotlikoff has authored another book set to be released in January, “MONEY MAGIC: An Economist’s Secrets to More Money, Less Risk, and a Better Life.” He not only discusses tips on leveraging the most from Social Security — including when retirees return to work and suspend their benefits for a time, but also how to successfully navigate the entirety of one’s personal finances in a “retirement makeover.”
“I cover many aspects, including housing — whether someone should downsize their home, turn it into an AirBnB or have their adult kids move in with them,” he says. “People can also sell their home to their kids and lease it back from them, or free up trapped equity with a reverse mortgage.”
Kotlikoff also discusses the prudence of moving to another state with a lower cost of living, upside investing and when it’s best to start withdrawing from retirement accounts — and how to best deal with the real risk of increased inflation that could potentially deteriorate one’s standard of living in later years.
“That’s very important especially now that we have 6 percent inflation,” he says. “A risk makeover is part of a retirement makeover.”
Kotlikoff is also a fellow of the American Academy of Arts and Sciences, a fellow of the Econometric Society, a research associate of the National Bureau of Economic Research, and the director of the Fiscal Analysis Center. He has written 20 books and hundreds of professional articles, op-eds and is a frequent television and radio guest. His columns have appeared in The New York Times, The Wall Street Journal, The Financial Times, The Boston Globe, Bloomberg, Forbes, Yahoo.com, Fortune and other major publications. In 2014, The Economist named him one of the world’s 25 most influential economists.