MONEY Social Security

The Right Way to Claim Social Security Widow’s Benefits

Ask the Expert Retirement illustration
Robert A. Di Ieso, Jr.

Q. I am 61 and was divorced from my husband two years ago after more than 16 years of marriage. He died a few months ago at 72 and had been receiving Social Security benefits of $1,663 a month. I am working part-time, earning $13,000 a year, and want to continue doing so. According to the Social Security calculator, my own retirement benefit would be $1,028 a month if I claim at age 62, $1,364 at age 66 (my full retirement age), or $1,800 at age 70. If I claim a (reduced) widow’s survivor benefit before age 66, I expect to receive $1,314 a month if I file now at age 61½ or $1,347 at age 62.

Can I apply just for my survivor’s benefits now, continue to work, apply for Medicare at age 65, and at age 70 file for my own benefits? Also, while receiving survivor’s benefits, would I need to apply for my own benefits at age 66 and suspend it until age 70; or can I continue to collect survivor’s benefits, with no need to apply and suspend at 66, and change to my own benefits at 70? — Elizabeth

A. This is an incredibly well-informed query, so, first off, kudos to Elizabeth for doing her homework and doing such a good job looking out for herself. The details she provides are essential for figuring out her best Social Security claiming choice.

The simple answer to her question—whether to claim survivor’s benefits now—is “Yes.” The reasons for this illustrate the complexity of individual retirement benefits, as well as the way benefits interact, which can increase or reduce your Social Security income. This is a key issue for women, who tend to outlive their spouses and file the lion’s share of survivor claims.

The rules for widow’s (or survivor’s) benefits are different from spousal benefits, which involve claims on a current or divorced spouse. Survivor’s benefits may be taken as early as age 60, while spousal benefits normally can’t begin until age 62. Both benefits are lowered if you claim early, but the percentage reductions differ. That’s because survivors can claim up to six years before reaching their full retirement age (FRA), which is 66 for current claimants, compared with just four years for early spousal claims.

Another key difference is that survivor benefits do not trigger deeming when taken prior to full retirement age, which can be a real headache. If you are eligible to file for a spousal benefit and do so before age 66, Social Security will deem you to be also filing for your own retirement benefit. It does not pay two benefits at the same time but will give you an amount roughly equal to the greater of the two benefits. Further, once your retirement benefit has been triggered early, it will be permanently reduced.

The good news is that deeming does not apply to survivor benefits. So Elizabeth can file for a widow’s benefit right away and not trigger a claim for her own retirement benefit. Because it’s likely her retirement benefit will be higher at age 70 than her widow’s benefit, she should plan on taking the widow’s benefit as soon as possible. At age 70, she can switch to her retirement benefit .

She is correct that she will be hit with an early filing reduction. But given the small increases she would receive if she waited, the benefit of deferring is outweighed by the gains of claiming now. That’s because she will get more years of benefits, so the cumulative amount of income will be greater.

The modest earnings she receives won’t be a factor either. “Since her earnings are below the 2014 annual earning limits, she could qualify for widows benefits beginning this month with no loss of benefits due to the earnings test,” says James Nesbitt, a Social Security claims representative for nearly 40 years who now provides benefits counseling for High Falls Advisors in Rochester, NY.

“Depending on her past work history, her continued contributions into the Social Security system by working may have the effect of increasing her monthly benefit amount,” he adds. “The online retirement calculator on Social Security’s website will allow for future earnings to be used in estimating benefits.”

Elizabeth should set up an appointment now at a local Social Security office in order to begin receiving benefits as soon as possible, Nesbitt adds. If she files for her survivor benefit before age 65, Social Security should automatically enroll her in Medicare.

Further, Nesbitt notes, the precise amount of her survivor’s benefit depends on when her late husband filed early for his retirement benefit. This, like much else about Social Security, can be very complicated. But if his $1,663 benefit was the result of an early retirement filing, her actual survivor’s benefit could end up being much higher than she estimates. She should review this possibility when she meets with the agency to file her claim.

Lastly, she should not file and suspend her own retirement benefit but simply collect her survivor’s benefit and then claim her own retirement benefit at age 70. “Once a retirement claim has been filed at 66, albeit suspended, the amount of the widow’s benefit will be calculated as if she is [also] receiving the retirement benefit,” Bennett notes. “A ‘file and suspend’ would reduce or possibly eliminate the widow’s benefit.”

Philip Moeller is an expert on retirement, aging, and health. His book, “Get What’s Yours: The Secrets to Maxing Out Your Social Security,” will be published in February by Simon & Schuster. Reach him at moeller.philip@gmail.com or @PhilMoeller on Twitter.

Read next: The Best Way to Tap Your IRA in Retirement

MONEY retirement planning

What Scrooge Can Teach You About Retirement Planning

Scrooge in A Christmas Carol
Scrooge in "A Christmas Carol" © Walt Disney Co.—Courtesy Everett Collection

Sure, he was tight-fisted. But Scrooge's money habits are a useful model for reaching your retirement goals.

I can hear the cries of outrage already. How can A Christmas Carol‘s Scrooge, the character Charles Dickens described as tight-fisted, squeezing, wrenching, grasping, scraping, clutching and covetous, possibly be a paragon of retirement planning? Bah humbug! If anything, he’s a role model for how not to live one’s life!

And I agree, up to a point. But if you’re willing to overlook a few of his, shall we say, flaws, good old Scrooge also possessed some qualities that make him a pretty decent role model for achieving a secure and meaningful retirement. Here are three we may well to emulate, albeit in moderation, to improve our retirement outlook.

1. Scrooge had a phenomenal work ethic. When the novel opens, Scrooge is at work in his counting-house late in the afternoon on Christmas eve. He didn’t duck out early to do some last-minute shopping. He wasn’t posting Happy Holidays photos on Instagram. He was putting in a full day’s work.

Granted, in recent years millions of people who would like to do just that haven’t had the option. Perhaps the recent upbeat employment report signals a more vibrant jobs market ahead. But the fact remains that the commitment to work that Scrooge displays is crucial to a successful retirement for two reasons: you can’t build a nest egg without regular income; and the amount you earn and number of years on the job largely determine the size of a key source of retirement income: your Social Security benefit.

Note too that Scrooge was still working relatively late in life. Dickens doesn’t give Ebenezer’s age, but many people estimate he was in his late 50s or 60s, which is getting up there considering life expectancy in mid-19th century England was about 40. So we can take a cue from Scrooge on this score as well. For example, in their new book Falling Short: The Coming Retirement Crisis and What To Do About It, authors Alicia Munnell, Charles Ellis and Andrew Eschtruth point out that just a few extra years on the job can go a long way toward improving one’s retirement prospects. And if that doesn’t do the trick, you can always supplement your income by working in retirement.

2. The man was a prodigious saver. Scrooge definitely knew a thing or two about saving a buck. And he didn’t resort to gimmicks like apps that round up credit card purchases to the nearest dollar and deposit the difference in an investing account, giving you the impression you’re saving while encouraging spending. He did it the old-fashioned way by keeping his everyday living expenses down.

He went way, way too far, of course, what with living in the dark, keeping a very small fire and eating gruel from a saucepan. But he had the right idea—namely, if you live below your means by not splurging on over-the-top vacations, expensive cars and big houses with mortgage payments to match, you’ll have a better chance of saving the 15% a year that can lead to a comfy retirement. And while Dickens doesn’t get into Scrooge’s investing habits, my guess is that ol’ Ebenezer wouldn’t fall for pitches for dubious or expensive investments. I think he’d be an index-fund kinda guy who realizes that reducing investment fees boosts the size of your nest egg and the amount of income you can draw from it.

3. Scrooge (eventually) understood what really matters. This may very well be the most important lesson we can draw from Scrooge. Sure, it took visits from his dead business partner Marley and a few ghosts to transform him. But by the end of the novel, Scrooge has morphed from a pinched and selfish man into a generous and compassionate person who anonymously sends a turkey to the Cratchit home for Christmas dinner and becomes like a second father to Bob Cratchit’s son, Tiny Tim. In short, he realizes that wealth brings happiness only when we share it with our families and others in ways that improve all our lives.

So while it’s important to focus on making good financial decisions, we should never forget that retirement planning isn’t just about the bucks. Ultimately, it’s about creating a retirement lifestyle that has meaning and purpose as well as financial security.

So if your thoughts happen to stray to your retirement over this holiday season and you find yourself wondering how you might improve your planning, ask yourself WWSD—What Would Scrooge Do? Whether it’s the stingy Ebenezer or the more benevolent version, he just might provide the inspiration you need.

Walter Updegrave is the editor of RealDealRetirement.com. If you have a question on retirement or investing that you would like Walter to answer online, send it to him at walter@realdealretirement.com.

More from RealDealRetirement.com:

How To Invest In Today’s Topsy-Turvy Market—And In The Year Ahead

What’s Your “Magic” Retirement Number?

Does Uncle Sam Want To Contribute $2,000 Toward Your Retirement?

MONEY

How Your Earnings Record Affects Your Social Security

Q: I took my Social Security in Jan 2011 at age 65 1/2 and have continued to work full time. By the end of this year, I figure I will have contributed around $5,500 into Social Security in each of the past four years. Knowing I made more money in recent years than I did in the prior years—the years on which my Social Security was based—I expected a readjustment, but my benefits didn’t change. My local Social Security office told me that any readjusting would have been done automatically in January. Then last month I got a letter stating that my check will increase by $1 per month, attributed to the 2013 year. What about 2011 and 2012? Nice return on $5,500! Do I have any recourse? Don

A: First off, I agree that it is very hard to keep paying into Social Security after you’ve started receiving benefits and not feel like you’re getting anything out of it. I think payroll taxes should be reduced for people who have reached full retirement age (it’s 66 now and will rise to 67 for people born in 1960 and later). Doing this would benefit workers and also give employers an incentive to hire older workers. To say the least, I am not holding my breath waiting for such changes to be enacted.

The specifics of how your future benefits are affected by your recent earnings is all about how Social Security calculates your earnings base. Social Security keeps track of all your covered earnings (earnings on which you paid Social Security payroll taxes) during your working life. Each year, it applies an index factor to your earnings to adjust them for the wage inflation that has occurred since that year.

In this way, money earned during 1985, for example, carries the same weight in calculating your Social Security benefits as money earned in 2005 or 2010 or 2014. This indexing stops when you turn 60; any earnings after that age are included in your earnings record on an unadjusted basis. Because of wage inflation, it’s quite likely these later-age earnings will raise your benefits.

The agency uses your highest 35 years of earnings to determine what it calls your Primary Insurance Amount (PIA), the benefit you’d get if you began collecting benefits at your full retirement age, which in your case is 66. If you do not have 35 years of eligible covered earnings, the agency enters a zero for each “missing” year. So, for example, if you had only 20 years of covered earnings, Social Security would calculate your benefit by using the earnings for those 20 years, adding 15 zeroes, and using this average to determine your PIA. (The PIA is also used in determining benefits to your spouse or former spouse that are based on your earnings record.)

Now, even though your earnings have been increasing, it’s possible they would not become one of your new top 35 earnings years. And even if they did, they might not raise your earnings base very much.

Perhaps you already have obtained your earnings record from Social Security. If not, you can get your earnings record at the Social Security website. It’s also possible, but a lot of work, to use this record to compute your earnings base.

The only recourse I can suggest is to take your earnings record to a Social Security office and ask a representative to walk you through it to make sure you’re being properly credited for your recent work history.

I hope this helps—though I realize my suggested remedy may only lead to more frustration for you. Best of luck.

Philip Moeller is an expert on retirement, aging, and health. His book, “Get What’s Yours: The Secrets to Maxing Out Your Social Security,” will be published in February by Simon & Schuster. Reach him at moeller.philip@gmail.com or @PhilMoeller on Twitter.

Read next: Why Workers Undervalue Traditional Pension Plans

MONEY Social Security

The Hidden Pitfalls of Collecting Social Security Benefits from Your Ex

Q. I have spoken with seven people at the Social Security Administration and gotten five different answers to my question. I want to draw Social Security from my ex-husband of 30 years at my present age, 62. I know that is not my full retirement age, and I would receive a reduced benefit. I also want to wait until full retirement age, 66, to draw from my Social Security benefit and receive it in full without reduction. Can I do this? —Sandra

A. This sounds like a sensible plan but unfortunately, when it comes to Social Security rules, logic doesn’t always carry the day. In this case, your plan conflicts with the agency’s so-called “deeming” rules, which apply to people who apply for spousal benefits—whether they are married or divorced—before they reach full retirement age.

Before we get to the problems with deeming, let’s quickly review the basics. If you were 66 and filed a divorce spousal claim, you would collect the highest possible spousal benefit—50% of the amount your ex-husband is entitled to at his full retirement age. It isn’t necessary for your ex to have filed for his own benefits at 66 for you to receive half of this amount. In fact, he doesn’t even need to have reached age 66. That’s just the reference point for determining spousal benefits.

Since you’re filing early, however, you won’t get half of his benefits. The percentages can be confusing, so here’s an example from the agency’s explanation of benefit reductions for early retirement. If your ex-husband’s benefit at full retirement age was $1,000 a month, your “full” divorce spousal payout at age 66 would be 50%, or $500. If you file at age 62, that amount will be reduced by 30% of $500, or $150. The payout you get, therefore, comes to $350 ($500 minus $150), or 35% of his benefit.

There are a few other rules for receiving divorce spousal benefits. You cannot be married to someone else. And if your former husband has not yet filed for his own Social Security retirement benefit, you must be divorced for at least two years to claim an ex-spousal benefit.

Now for the deeming pitfalls. If you meet these tests and file for a divorce spousal benefit before reaching full retirement age, Social Security deems you to be simultaneously filing for a reduced retirement benefit based on your own earnings record. The agency will look at the amount of each award and will pay you an amount that is equal to the greater of the two.

Since your spousal filing has also triggered a claim based on your own work history, you cannot then wait until full retirement age to file for your own benefits. In other words, your own retirement benefit will be reduced for the rest of your life. Logical or not, those are the rules.

There’s no simple solution to the deeming problem, but you do have some choices. Figuring out the best option depends on many factors, including the levels of Social Security benefits that you and your ex-husband can receive, as well as your overall financial situation. Do you absolutely need to begin collecting some Social Security benefits at age 62, or can you afford to wait? You should also consider whether you’re in good health and how long you think you may live.

Your first choice is to do nothing until you turn 66, which is the full retirement age for someone who is now 62. Once you hit that milestone, deeming no longer applies. At that time, you could collect your unreduced divorce spousal benefit and suspend your own benefit for up to four years till age 70. Thanks to delayed retirement credits, your benefit will rise by 8% a year, plus the rate of inflation, each year between age 66 and 70. (Your spousal benefit remains the same, except for the inflation increase.) So, even if your divorce spousal benefit is greater than your retirement benefit at age 66, this may no longer be the case when you turn 70.

But if you need the money now, your best choice may be to file for reduced benefits. If your reduced divorce spousal benefit is higher than your own reduced retirement benefit, you have another option. At 66, you could suspend your own benefit and receive only your excess divorce spousal benefit—the amount by which your ex-spousal benefit exceeds your retirement benefit. It probably won’t be much. Still, suspending your benefit will allow it to rise until age 70, though it will be lower than you would have otherwise received because of early claiming. If these increases provide more income than your divorce spousal benefit, this move may be worth considering.

Variation of these choices include filing early at age 63, 64, or 65. You can also consider how delayed retirement credits would affect your decision if you filed at age 67, 68, or 69. In the end, you’ll need to do the math to compare the potential benefits of delaying vs. claiming now. Or you may want to get help from a financial adviser.

Philip Moeller is an expert on retirement, aging, and health. His book, “Get What’s Yours: The Secrets to Maxing Out Your Social Security,” will be published in February by Simon & Schuster. Reach him at moeller.philip@gmail.com or @PhilMoeller on Twitter.

Read next: This New Retirement Income Solution May Be Headed for Your 401(k)

MONEY Social Security

6 Things You Need to Know About Social Security Benefits in 2015

knife cutting dollar bill
David Franklin

Make sure you're on course to get as much in Social Security benefits as possible both in 2015 and beyond.

Anyone who has ever taken a look at their Social Security planning knows how complex the program can be. With a huge number of variables involved in calculating your benefits, it can be a huge challenge to estimate exactly what you’ll receive when you decide to retire. But that doesn’t mean you should give up on trying to figure out what Social Security is likely to mean for you. To help simplify your planning, below you’ll find six key numbers related to Social Security in 2015 that everyone should know about.

1. Social Security tax wage limit: $118,500

Wage earners pay 6.2% of their earnings in the form of Social Security taxes, with employers matching that amount out of their own pocket. Self-employed individuals pay both halves of the tax, adding up to a 12.4% rate. But the Social Security tax only applies up to a certain wage limit, and benefits are therefore calculated based on those maximum taxed earnings, rather than your actual income for a given year. Each year, that number rises with the increase in the national average wage index, so 2015’s rise of $1,500 represents about a 1.3% gain from last year’s figure. As a result, the maximum amount of Social Security taxes that employees could pay will rise by $93 to $7,347 for those at or above the wage limit.

2. Cost-of-living increase for Social Security benefits: 1.7%

Each year, Social Security benefits are adjusted to reflect changes in the cost of living. Over the past year, the relevant measure of inflation rose 1.7%, defining the rise in Social Security benefits that will take effect in January 2015. The change makes 2015 the third year in a row that Social Security recipients will see a rise of less than 2% in their benefits, as tepid levels of inflation have held back the cost-of-living adjustment from its typical higher level.

3. Earnings required to receive one coverage credit: $1,220

In order to receive retirement benefits, you need to earn 40 coverage credits over the course of your career. Each year, you can earn a maximum of four credits, and the amount of income you need each year rises according to changes in wages. The 2015 figure is up $20 from 2014, so as long as you make $4,880 or more in 2015, you’ll get the full four credits available and get that much closer to locking in your Social Security benefit eligibility.

4. Maximum monthly benefit for worker retiring at full retirement age: $2,663

The most that you can receive from Social Security is based on work histories that have the maximum taxable earnings for at least 35 years during a worker’s career. Because Social Security benefits are progressive, increases in maximum earnings don’t translate to proportional increases in the monthly payments that retirees receive. The 2015 figure is $21 higher than the $2,642 maximum for 2014. For those who choose to wait beyond retirement age to claim benefits, though, additional amounts are still available: Delayed-retirement credits amount to an extra 8% in benefits per year beyond full retirement age.

5. Average monthly Social Security benefit for retired workers: $1,328

Most workers don’t come close to receiving the maximum amount of Social Security benefits possible. The average monthly benefit expected in January 2015 amounts to just less than half of the maximum. That’s up $34 from the $1,294 average of January 2014, reflecting both the 1.7% cost-of-living adjustment and changes in the typical work history for those receiving benefits in 2015.

6. Maximum amount those under full retirement age can earn in wages and salaries without forfeiting benefits: $15,720

Those who take Social Security early have limits imposed on their benefits if they continue to work. Specifically, those who earn more than a certain threshold have their benefits reduced, losing $1 in benefits for every $2 they earn above the limit. For 2015, that limit is $15,720, up $240 from the 2014 figure.

Losing benefits isn’t necessarily as bad as you think, because for each month in which benefits are eliminated, the Social Security Administration will essentially treat you as though you had started getting benefits a month later than you actually did. That will pump up your future monthly benefit amount, helping to offset the money that was taken away from you.

Understanding the ins and outs of Social Security can be a mind-boggling challenge. But by keeping these simple numbers in mind, you can get the basics of what the program will give you when you retire and make sure you’re on course to get as much in Social Security benefits as possible both in 2015 and beyond.

MONEY retirement planning

Flunking Retirement Readiness, and What to Do About It

red pencil writing "F" failing grade
Thomas J. Peterson—Alamy

Americans don't get the basics of retirement planning. Automating 401(k)s and expanding benefits for lower-income workers may be the best solution.

Imagine boarding a jet and heading for your seat, only to be told you’re needed in the cockpit to fly the plane.

Investing expert William Bernstein argued in a recent interview that what has happened in our workplace retirement system over the past 30 years is analogous. We’ve shifted from defined benefit pension plans managed by professional financial pilots to 401(k) plans controlled by passengers.

Once, employers made the contributions, investment pros handled the investments and the income part was simple: You retired, the checks started arriving and continued until you died. Now, you decide how much to invest, where to invest it and how to draw it down. In other words, you fuel the plane, you pilot the plane and you land it.

It’s no surprise that many of us, especially middle- and lower-income households, crash. The Federal Reserve’s latest Survey of Consumer Finances, released in September, found that ownership of retirement plans has fallen sharply in recent years, and that low-income households have almost no savings.

But even wealthier households seem to be failing retirement flight school.

Eighty percent of Americans with nest eggs of at least $100,000 got an “F” on a test about managing retirement savings put together recently by the American College of Financial Services. The college, which trains financial planners, asked over 1,000 60- to 75-year-olds about topics like safe retirement withdrawal rates, investment and longevity risk.

Seven in 10 had never heard of the “4% rule,” which holds that you can safely withdraw that amount annually in retirement.

Very few understood the risk of investing in bonds. Only 39% knew that a bond’s value falls when interest rates rise—a key risk for bondholders in this ultra-low-rate environment.

“We thought the grades would have been better, because there’s been so much talk about these subjects in the media lately,” said David Littell, who directs a program focused on retirement income at the college. “We wanted to see if any of it is sinking in.”

Many 401(k) plans have added features in recent years that aim to put the plane back on autopilot: automatic enrollment, auto-escalation of contributions and target date funds that adjust your level of risk as retirement approaches.

But none of that seems to be moving the needle much. A survey of 401(k) plan sponsors released last month by Towers Watson, the employee benefit consulting firm, found rising levels of worry about employee retirement readiness. Just 12% of respondents say workers know how much they need for retirement; 20% said their employees are comfortable making investment decisions.

The study calls for redoubled efforts to educate workers, but there’s little evidence that that works. “I hate to be anti-education, but I just don’t think it’s the way to go,” says Alicia Munnell, director of Boston College’s Center for Retirement Research. “You have to get people at just the right time when they want to pay attention—just sending education out there doesn’t produce any change at all.”

What’s more, calls for greater financial literacy efforts carry a subtle blame-the-victim message that I consider dead wrong. People shouldn’t have to learn concepts like safe withdrawal rates or the interaction of interest rates and bond prices to retire with security.

Just as important, many middle- and lower-income households don’t earn enough to accumulate meaningful savings. “We’ve had stagnant wage growth for a long time—a lot of people can’t save and cover their living expenses,” says Munnell, co-author of “Falling Short: The Coming Retirement Crisis and What to Do About It” (Oxford University Press, December 2014).

Since the defined contribution system is here to stay, she says, we should focus on improving it. “We have to auto-enroll everyone, and auto-escalate their contributions. Otherwise, we’re doing more harm than good.”

Munnell acknowledges that a better 401(k) system mainly benefits upper-income households with the capacity to save. For everyone else, it’s important that no cuts be made to Social Security. And she says proposals to expand benefits at the lower end of the income distribution make sense.

“Given all the difficulty we’re having expanding coverage with employer-sponsored plans, that is the most efficient way to provide income to lower-paid workers.”

Read next: The Big Flaws in Your 401(k) and How to Fix Them

MONEY Social Security

This Letter Can Be Worth $1 Million

envelope with $100 bills
Steven Puetzer—Getty Images

Paper Social Security statements are back. Here’s how to use that information to plan smarter.

This fall the Social Security Administration began mailing out benefit statements for the first time since 2011. It’s crucial information, especially if you’re poised to move to your beach condo in Boca soon. “For many upper-middle-class couples, those benefits can be worth as much as $1 million over the course of your retirement,” says Chris Jones, chief investment officer of 401(k) adviser Financial Engines.

To save money, Social Security had been directing people to its website for benefits information. After a backlash, the agency resumed mailings to most workers reaching landmark birthdays—ages 40, 45, and so on. Of course, you don’t need to wait for a paper statement to find out how your benefit stacks up. For an estimate, simply sign up online.

YOURThat’s well worth doing if you’re within a few years of retirement. Your future Social Security income is key to determining if your financial strategy is on track. Then take these steps.

Proofread it. Make sure your earnings history is accurate. “If Social Security doesn’t have an earnings record for a particular year, there will be a zero, which may reduce your benefit,” says Boston University economics professor Laurence Kotlikoff, who heads MaximizeMySocialSecurity.com, an online benefits calculator.

Set your target. Your statement will have the income you can expect at three different retirement ages, assuming you keep working at your current salary. But you have far more options for when to start collecting benefits. If you are single, have never married, and don’t plan to work in retirement, your choice will be straightforward most of the time. Your main decision is whether to delay filing, which will boost your benefit by 6% to 8% a year up until the maximum at age 70. Financial Engines and AARP have free online tools that let you compare your annual and lifetime benefits based on the age you claim.

Plot the best strategy. If you’ve ever been married, your choices are more complex. “Your claiming strategy can be the biggest retirement decision you’ll make,” says Jones. Coordinating benefits with your spouse the right way can add as much as $250,000 to your lifetime Social Security income, according to Financial Engines. That’s why you may want to pay for a calculator that allows you to add more variables, such as working in retirement or a wide age gap in your marriage. MaximizeMySocialSecurity.com ($40) and SocialSecuritySolutions.com (starts at $20) both do that.

Get a reality check. Once you have a rough idea of your future benefit, plug that number into a retirement-income calculator, such as the tool at T. Rowe Price. You’ll see if your payouts, plus your portfolio withdrawals, are enough to ensure a comfortable retirement. If not, use the tool to see how saving more or working longer can help, or consult an adviser. Given the dollars at stake, devising a smart Social Security strategy can be well worth a fee.

MONEY retirement income

The Powerful (and Expensive) Allure of Guaranteed Retirement Income

141203_RET_Guaranteed
D. Hurst—Alamy

Workers may never regain their appetite for measured risk in the wake of the Great Recession, new research shows.

People have always loved a sure thing. But certainty has commanded a higher premium since the Great Recession. Five years into a recovery—and with stocks having tripled from the bottom—workers overwhelmingly say they prefer investments with a guarantee to those with higher growth potential and the possibility of losing value, new research shows.

Such is the lasting impact of a dramatic market downdraft. The S&P 500 plunged 53% in 2007-2009, among the sharpest declines in history. Housing collapsed as well. Yet the S&P 500 long ago regained all the ground it had lost. Housing has been recovering as well.

Still, in an Allianz poll of workers aged 18 to 55, 78% said they preferred lower certain returns than higher returns with risk. Specifically, they chose a hypothetical product with a 4% annual return and no risk of losing money over a product with an 8% annual return and the risk of losing money in a down market. Guarantees make retirees happy.

This reluctance to embrace risk, or at least the urge to dial it way back, may be appropriate for those on the cusp of retirement. But for the vast majority of workers, reaching retirement security without the superior long-term return of stocks would prove a tall order. Asked what would prevent them from putting new cash into a retirement savings account, 40% cited fear of market uncertainty and another 22% cited today’s low interest rates, suggesting that fixed income is the preferred investment of most workers. Here’s what workers would do with new cash, according to Allianz:

  • 39% would invest in a product that caps gains at 10% and limits losses to 10%.
  • 19% would invest in a product with 3% growth potential and no risk of loss.
  • 19% would invest in a savings account earning little or no interest.
  • 12% would hold their extra cash and wait for the market to correct before investing.
  • 11% would invest in a product with high growth potential and no protection from loss.

These results jibe with other findings in the poll, including the top two concerns of pre-retirees: fear of not being able to cover day-to-day expenses and outliving their money. These fears drive them to favor low-risk investments. One product line gaining favor is annuities. Some 41% in the poll said purchasing such an insurance product, locking in guaranteed lifetime income, was one of the smartest things they could do when they are five to 10 years away from retiring.

Lifetime income has become a hot topic. With the erosion of traditional pensions, Social Security is the only sure thing that most of today’s workers have in terms of a reliable income stream that will never run out. Against this backdrop, individuals have been more open to annuities and policymakers, asset managers and financial planners have been searching for ways to build annuities into employer-sponsored defined-contribution plans.

Doing so would address what may be our biggest need in the post defined-benefits world and one that workers want badly enough to forgo the stock market’s better long-run track record.

More from Money’s Ultimate Retirement Guide:

How do I know if buying an annuity is right for me?

What annuity payout options do I have?

How can I get rid of an annuity I no longer want?

MONEY Social Security

Why Social Security Suddenly Changed Its Benefits Withdrawal Rule

Ask the Expert Retirement illustration
Robert A. Di Ieso, Jr.

Q: I retired in 2009 to care for an ailing parent who has since passed away. I took Social Security at age 62, when the law allowed claimants to pay back their Social Security and receive the highest benefits at age 70. Since that time the law has changed and repayment can only be made in the first year. Do you know of any proposal to change the current rules for those who signed up under the old law? —Sandra

A: As Sandra correctly notes, Social Security changed its benefits withdrawal policy in December 2010, after she had retired under its prior rules—and it’s one of the most unusual policy shifts that the agency has enacted. Consider that Social Security, which often gets dinged for slow response time, made this change lightning fast. What’s more, the new policy seems to have little to do with the needs of beneficiaries like Sandra and everything to do with the agency being surprised—and perhaps chagrined—that people were paying attention to its often arcane rules and actually taking advantage of them.

Under the old policy, people who had begun receiving benefits could, at any time, pay back everything they’d received and effectively wipe clean their benefit history. By resetting their benefit record this way, people who took reduced retirement benefits early would be able to file later for much higher monthly payments. For people born between 1943 and 1954, for example, retirement benefits at age 70 are 76% higher than those taken at age 62.

Few people paid much attention to this rule until a growing group of financial planners and Social Security experts began highlighting the possible gains of withdrawing benefits and delaying claiming. As the word spread, journalists began to write about these rules for an even wider audience.

Social Security, which previously had no problem with the rule when few were using it, changed its mind as more and more people began withdrawing their benefits. Suddenly, without an extended period for evaluation or debate, the agency issued a final rule limiting the benefit withdrawal option—and it took effect immediately. If the public wanted to comment, it would be able to do so only after the rule was changed. By comparison, the decision to raise the official retirement age in the program from 66 to 67 was enacted in 1983—37 years before it will take effect in the year 2020.

Here’s what the agency said at the time it changed its rules on withdrawing benefits:

“The agency is changing its withdrawal policy because recent media articles have promoted the use of the current policy as a means for retired beneficiaries to acquire an ‘interest-free loan.’ However, this ‘free loan’ costs the Social Security Trust Fund the use of money during the period the beneficiary is receiving benefits with the intent of later withdrawing the application and the interest earned on these funds. The processing of these withdrawal applications is also a poor use of the agency’s limited administrative resources in a time of fiscal austerity—resources that could be better used to serve the millions of Americans who need Social Security’s services.”

Further, in making the shift to a one-year withdrawal period, the agency explained that the policy was designed to reduce the value of the option so few people would use it. Today, by the way, the agency supports delaying retirement much more than it used to.

Of course, telling people to delay claiming is of little help to people like Sandra, who retired under the old rule and was caught by the sudden policy shift. Is there any likelihood that the rule could be changed to accommodate this group? Not really, says James Nesbitt, a Social Security claims representative for nearly 40 years who is now providing benefits expertise for High Falls Advisors in Rochester, NY. “Unfortunately,” he says, “this change did not contain any grandfathering provision. I am not aware of any pending actions within Congress or Social Security that would extend grandfather rights to those who were disadvantaged by this change.”

Philip Moeller is an expert on retirement, aging, and health. His book, “Get What’s Yours: The Secrets to Maxing Out Your Social Security,” will be published in February by Simon & Schuster. Reach him at moeller.philip@gmail.com or @PhilMoeller on Twitter.

More on Social Security:

How to protect your retirement income from Social Security mistakes

Here’s how Social Security will cut your benefits if you retire early

Will Social Security be enough to retire on?

Read next: Can I Collect Social Security From My Ex?

MONEY Social Security

Can I Collect Social Security From My Ex?

Ask the Expert Retirement illustration
Robert A. Di Ieso, Jr.

Q: I have been divorced twice and currently am not married. Can I draw Social Security off either of my ex-husbands? I was married to the first one for 16 years and the second for 11. And would I be able to remarry and still draw off the ex? I am 62 now. – Rita Diestel, Bruce, Miss.

A: You can collect Social Security benefits based on the earnings of a former spouse if you were married 10 years or more, and you are at least 62 and not currently married. So, you’re good on all three counts.

But there are a few more wrinkles, says Adam Nugent, managing partner of Foresight Wealth Management, an investment advisory firm in Sandy, Utah.

You can collect benefits from the ex-husband with the larger payout but only if you’re not eligible for a higher amount based on your own work record. You can check how much you’re entitled to and your ex-husbands’ payouts (if you have their Social Security numbers) at ssa.gov.

To collect on an ex, you must be divorced at least two years. The former husband that you base your benefits on must be at least 62, though he doesn’t have to have started receiving his benefits yet for you to get yours.

But just because you may be able to collect now doesn’t mean it’s the best move for you, says Nugent. You are entitled to 50% of your former husband’s benefits but, like anyone collecting Social Security, you’ll get less if you start taking it before your full retirement age of 66. The longer you delay the better. If you decide to take it before 66, your benefits will be permanently reduced, 8% for each year you take it before 66. “You will be rewarded for waiting,” says Nugent.

As for marrying again, if your ex is remarried, that won’t affect your benefits. But if you remarry that’s a different story. Nearly 60% of U.S. divorcees remarry and if you do, you are no longer able to get a divorced spouse’s benefits, unless you get divorced again yourself.

If you remain single, you can use many of the same strategies that married spouses use to boost your payouts, says Nugent. One option is to file a restricted application with Social Security (at full retirement age) to collect a divorced spousal benefit, which is half of what your ex gets. Then, once you reach 70, you can stop receiving the ex-spousal benefit and switch to your own benefit, which will be 32% higher than it would have been at your full retirement age.

The rules are a bit different if your former spouse dies. You are entitled to 100% of your deceased ex-spouse’s Social Security, the same as any widow even if he was remarried. And if you are married when your ex passes away, you can collect survivor benefits as long as you didn’t remarry until age 60 or later. If you are collecting Social Security based on your own work history, you can switch to survivor’s benefits if the payment is larger. Or, if you’re collecting survivor’s benefits, you can switch to your own retirement benefits — between 62 and 70 — if it offers a larger payment.

There’s a lot to think about, says Nugent, but most important is that there are big benefits for delaying. As a woman you’re more vulnerable in retirement than a man because women typically live longer. Of course, your health, expected longevity, and other retirement savings should be factored in as well. “But if you can wait at least a few more years to start collecting Social Security, that will give you more security in the long run,” says Nugent.

Do you have a personal finance question for our experts? Write to AskTheExpert@moneymail.com.

Read next: Why Social Security Suddenly Changed Its Benefits Withdrawal Rule

Your browser, Internet Explorer 8 or below, is out of date. It has known security flaws and may not display all features of this and other websites.

Learn how to update your browser