B O N N E R & P A R T N E R S I N V E S T O R N E T W O R K

Get What’s Yours: Social Security

Q&A with Co-Author Dr. Larry Kotlikoff

SPECIAL REPORT 2015

Get What’s Yours: Social Security Q&A with Co-Author Dr. Larry Kotlikoff

Amber Mason: Hi, all, thanks so

much for joining us. We’re going to go

ahead and get started with tonight’s

webinar. My name is Amber Lee Ma-

son. I’m the managing director here

at Bonner & Partners, and I’m here

tonight with Dr. Laurence Kotlikoff,

co-author with Paul Solman and Phil-

ip Moeller of Get What’s Yours: The

Secrets to Maxing Out Your Social Se-

curity. Larry, thank you so much for

being here.

Larry Kotlikoff: Great pleasure to be

with you, Amber.

AM: We’re going to get started in just

a second here, but first I want to make

sure everyone knows how this works.

You can submit a question via the or-

ange “Ask a Question” button. I have

a handful of questions folks submit-

ted beforehand; we’ll get started with

those, but if you have a question to

ask, go ahead and send it along to us,

and if you run into any technical trou-

bles, there’s a link right there at the

bottom of your page. The fine folks at

WordCast are on hand to help you out

personally. We’re also recording this

webinar and will post it on the Bon-

ner & Partners website just as soon

as we can. We don’t have much time,

so let’s get started. We’re going to be-

gin with a question from Robert from

Coralville, Iowa; he says, “I currently

have private disability insurance. So-

cial Security denied me because I had

my own business for 5 of the last 10

years, so I only have 18 of 20 needed

credits. I’m 60 years old. Would it be

beneficial to hire an attorney and ap-

peal my case?”

LK: Yeah, I don’t know – I don’t have

enough experience with trying to ap-

peal decisions by Social Security. I

really couldn’t give an informed judg-

ment on that one way or the other.

I’m not sure if you talk to an attorney,

they’ll say, definitely hire me, but I

would try and talk to someone who

has more experience with these kind

of appeals who’s not personally vest-

ed in the answer.

AM: Yeah, good advice. We’ll move

on to Edward from Bradenton, Florida.

He says, “I’m 86, single, and receive a

Social Security check in the amount of

$2,080. My health is good with no dis-

abilities. What options do I have for

increasing my monthly amount?”

LK: There’s no way, unfortunately,

unless you want to keep working; if

you earned above the ceiling for sure

you would raise your annual benefit;

if you can find a job at 86 that pays a

lot, you will definitely be able to raise

your benefits. Apart from that, the

only thing you could do is find some-

one to marry who had a very high ben-

efit that was larger than your check

and stay married to that person for

nine months, and then if the person

dies, you’ll be able to collect a widow-

er’s benefit, a widower’s benefit equal

to that person’s check, so that’s the

only other strategy I can think of for

potentially raising your monthly in-

come from Social Security.

AM: All right, Edward, you should be

out there looking for true love. Lin-

da, from New York, New York, asks,

“What if you’re divorced? Is there no

way to share in your husband’s Social

Security?”

LK: You absolutely can if you wait till

full retirement age and file just for

your divorcé spousal benefit; assum-

ing you were married for 10 or more

years, then you’ll get half of your ex’s

full retirement benefit, assuming your

ex is over 62 and you’ve been divorced

for two years. Let’s say you’re now 58

and your ex is roughly the same age.

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You make it to full retirement age,

about 56.5; you can file just for your

divorcée spousal benefit, get half of

his benefit, half of his full retirement

benefit. Regardless of when he takes

his benefit, you’ll get half of his full

retirement benefit and then if he

passes away, you’ll get a divorcé wid-

ow benefit, which will be potentially

exactly equal to the check he was get-

ting. This does not deprive him of any

benefits or take away from any bene-

fits of his current wife, if he’s remar-

ried, or his kids are going to get. It’s

independent of that.

AM: We had another question along

these lines from Robert from Taos,

New Mexico. He asks, “[At] what age

can you apply for your ex-spouse’s

Social Security benefits? Do you have

to wait till retirement age or can you

apply sooner?”

LK: That’s a very good question. You

can formally apply starting at age

62 for a divorcé spousal benefit or a

spouse benefit if you’re married. The

problem is that if you get that divorcé

spousal benefit, they will also force

you to take your retirement bene-

fit early, and then they’ll give you,

roughly speaking, the larger of the

two benefits. You’re retirement bene-

fit will likely, if you had a decent earn-

ings history or previous spousal ben-

efit and therefore you wipe out your

spouse benefit because you eviscerate

your retirement benefit, and it will be

reduced permanently. That’s called

deeming. They will deem you, if you

file just for your spousal benefit, to be

also filing for your retirement benefit,

if you do all this before full retirement

age. Once you hit full retirement age,

you can file just for your spousal ben-

efit and wait till 70 to collect your own

retirement benefit when it will be ac-

tually 76 percent higher than it would

be at 62, adjusted for inflation.

The best strategy if you’re divorced

and you were married for 10 or more

years, would be to wait till full retire-

ment age and then just take your di-

vorcé spousal benefit and then at 70

take your own retirement benefit and

if it’s larger than your divorcé spousal

benefit, you’ll get a bigger check [Break

in audio] your retirement benefit. This

all depends on your maximum age of

life. If you’re for sure, absolutely for

sure, going to die at 72, for example,

you wouldn’t want to wait this long

to start taking something from Social

Security. What I’m talking about is for

somebody who has a very high max-

imum age of life, like 100, and they

want people to advert old age, and we

have to worry about that outcome –

that’s kind of the worst-case scenario

in terms of our finances is living to our

maximum age of life and that could

be, if it is 100, that means paying for

yourself all those years and there are

people who actually are going to live

in retirement for more years than they

worked.

One has to be very careful and make

sure that you don’t take your retire-

ment benefits too early, because it’ll

be a lot lower and then for years and

years and years you’ll be collecting a

check that’s much, much smaller than

it would otherwise have been.

AM: My mother fell into this trap her-

self. The argument that she got from

Social Security when she spoke to

them was the break-even argument,

which you discuss a little bit in your

book. They showed it in there; if she

took her benefit early versus if she

took her benefit later and it was larger

and they told her how long it would

take for her to essentially break even

on that decision, and with those num-

bers, it looked like a good idea to her

to take her benefit early, but you’ve

argued that that kind of analysis

doesn’t work for everybody. Can you

talk a little bit about that?

LK: It doesn’t work for anybody. It’s

really 100 percent the wrong type of

analysis because Social Security is

providing longevity insurance, and

when we think about buying insur-

ance, we don’t think about that on a

break-even basis. For example, when

we think about buying a homeowner’s

policy, we don’t think about when we

break even on this policy. If we do,

we would never buy the homeown-

er’s policy, because we know that

the expected payoff from our house

burning down is much less than the

premiums that we have to pay. No,

we don’t think of it that way because

we can’t play the averages. We only

have one house that will or will not

burn down, and if it does burn down,

we want to have full coverage. If you

buy car insurance, we want to be fully

covered for totaling a car and hurting

somebody very badly. If we buy health

insurance, we want to be covered for

the most expensive operation that we

may have to have. Here, the worst-

case scenario is that we live to a max-

imum age of life.

Focusing on our expected age of life

is dead wrong, and that’s what Social

Security has been leading people to do

and that’s what they did to your mom

that was a great disservice. I wrote

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a column that actually came out yes-

terday in PBS NewsHour – if you go to

http://www.pbsnewshour.org and you

click on Economy and then you click

on Social Security, you’ll see my week-

ly column – which said Social Security

take down your… basically stop tell-

ing people to focus on life expectancy

because that’s not relevant. You can’t

count on dying on time. You have to

assume the worst-case scenario and

cover yourself for that situation. The

real risk in life is not dying, because if

you die you get to go to Heaven; you

don’t need money. The real risk is that

you’ll live to your maximum age of life.

Let me just say one other thing, which

is, Amber, how old is your mom?

AM: She is 69.

LK: Sixty-nine. Okay, had we spoken

a couple of years ago, even right now

she could – if you take your retirement

benefit early, let’s say at 62, you have

an option at full retirement age, which

for your mom was 66, to suspend your

retirement benefit and start it up again

at 70 and it will be 32 percent higher

than the level at which you suspended

it, above and beyond any adjustment

for inflation.

AM: If you’d taken your Social Secu-

rity early and you think it’s a mistake,

you still have a chance to fix part of

that mistake, anyway, when you reach

full retirement age: Is that what you’re

saying?

LK: Exactly, you have a window be-

tween full retirement and 70 to sus-

pend your benefit and start it up again.

A lot of people go to Social Security

and say I’d like to do this and the Social

Security agents, they don’t just make

the mistake that they made in counsel-

ing your mom, they make all kinds of

mistakes. I would say 40 percent of the

answers that Social Security folks are

giving people are either dead wrong,

mostly wrong, or just completely par-

tial information. A lot of people are

being told that they can’t suspend

their benefits, which it’s absolutely

crystal clear that they can, and if they

just go to a different office or speak to

a different person, they will be able to

collect – to suspend their benefits and

start them up again at 70. Our book Get

What’s Yours: The Secrets to Maxing

Out Your Social Security is very clear

as to what you can do. That’s why it’s

important to get ahold of this book, I

think, to really understand the general

parameters.

The book for many people will tell you

exactly what to do or give you an idea

at least. We’re not financial advisers,

so this is an educational guide, that’s

what the book is. I also have a software

company that has a program called

https://www.maximizemysocialsecu-

rity.com, and for more complicated

cases, the program – it only costs $40

and it will calculate really what’s go-

ing to maximize your lifetime benefits,

what’s the optimal strategy.

AM: We’ll make sure to remind people

of that link when we get to the end of

the Q&A, but I do think it illustrates

how important it is to get educated and

get informed before you go to Social

Security because they might not neces-

sarily be able to answer your questions,

as Larry said, accurately. We do have a

couple more questions here before we

get to some of the live questions. Ro-

saria from Huntington, Utah, wrote in

to ask, “Can I still work part time while

collecting Social Security?”

LK: Once you reach full retirement

age, the minute you reach full retire-

ment age, on your birthday – right now

the full retirement age is 66, so those

hitting their 66th birthday, the earn-

ings test ends. You can earn as much

money as you want and still collect

your retirement benefit or your spousal

benefit or your widow benefit without

any earnings test being applied. Before

that, between 62 and December 31 the

year before you reach your full retire-

ment year, there’s an earnings test,

which is taking 50 cents on the dollar

away from your benefit if you earn more

than about $15,000 right now and then

between January 1 and the day you

reach 66, reach full retirement age in

that year, there’s a different earnings

test, which has a higher ceiling, more

around $30,000and you lose about $1

for every $3 you earn, so the earnings

test is age-specific. The other thing –

two other very important things to say

about the earnings test, which is if you

lose benefits under the earnings test,

they will increase those benefits when

you hit full retirement age.

They will adjust the benefit upward –

and I’m talking about your retirement

benefit. If you lose some of your retire-

ment benefit, they will increase it due

to what’s called the adjustment reduc-

tion factor. The earnings test for many

people is not actually hurting you. You

lose some benefits for a bit, but then

you get higher benefits once you get to

full retirement age, but for other peo-

ple you can lose some benefit, hit full

retirement age, and then eventually

flip on to a different benefit. For ex-

ample, you might flip on to start tak-

ing your widow’s benefit and they may

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have raised your retirement benefit,

but if your widow’s benefit is higher,

it won’t help you. For some people the

earnings test is really a test – is really

a tax on your benefits. For other peo-

ple it is not. Again, the proper software

can figure this out for you in no time,

but it’s not something you necessarily

understand fully on your own. Some-

times you need a computer to run all

the cases and think through all these

issues.

AM: You did mention the widower’s

benefits. We had from Bill from West

University Place, Texas, write in to say,

“It’s 15 years since my wife of 30-plus

years died, but I’ve done nothing to

gain some benefit from her Social Se-

curity account. It is too late, and where

would I start?”

LK: How old is this gentleman? Amber,

do you have any idea?

AM: We don’t have a note from Bill on

how old he is, but let’s say he’s full re-

tirement age.

LK: He can file for his widower’s bene-

fit. If he hasn’t filed for his retirement

benefit, he could file just for his wid-

ower’s benefit and then at 70 take his

retirement benefit. If he’s already filed

for his retirement benefit, then he gets

hit by this, one of Social Security’s rule

of __________, which is that once you file

for your retirement benefit, if you take

another benefit, a spousal benefit or

divorcé spousal benefit or a widower’s

benefit or a divorcé widower’s bene-

fit, you will be given just the larger of

the two benefits. Because if he was a

higher earner than his wife, he won’t

get anything more. It really very much

depends on his age and what he’s done

so far in terms of whether or not he’s

started to take his own retirement ben-

efit. The best-case scenario would be

he’s 60. He could take a reduced wid-

ower’s benefit and then at 70 take his

own retirement benefit.

This presumes that his own retirement

benefit is larger than his widower’s

benefit or certainly his own retirement

benefit at 70, which is going to be at

the highest-level retirement benefit

that he can get, is larger than his wid-

ower’s benefits, then that would be the

optimal thing to do. If it were the oth-

er way around, the deceased wife was

the higher earner, then taking his own

retirement benefit early at 62 for a cou-

ple years and then flipping on to taking

his widower’s benefit would be the op-

timal thing to do. Again, the software

at https://maximizemysocialsecurity.

com can help sort that out, exactly

what’s optimal, and it very much de-

pends on the relative earnings of the

two parties.

AM: Great, we have a question come

in over the chat from Walter Richards.

He writes, “I’m 84 years old and I made

the mistake of signing up for Social Se-

curity three months before I turned 70.

I called Social Security to see if I could

change this, and they said no. What are

your thoughts on that, Larry?”

LK: If you’re within a year of having

filed for your retirement – how old did

he say he was?

AM: He said he’s 84, so this was a mis-

take made –

AM: A while back.

LK: You only have a year to withdraw

your retirement benefit application.

You have to pay back every penny you

got, you received, and then you can

kind of start from scratch, but he’s far

beyond a year after taking it. That was a

mistake and actually one of the things

I’ve recently found out that we didn’t

put in this book, because I didn’t know

it, is that if you’re trying to get your

age 70 benefit, and you go in a couple

months early, let’s say, or even maybe

you went in three months early, and

he says, I’d like to take my – we’ll say

Joe, goes in three months early, says,

I’d like to take my retirement benefit at

70. The Social Security clerk is free to

automatically give that person retroac-

tive benefits. So that person could ac-

tually be [Break in audio] benefits as if

he were trying to collect nine months,

the three months plus the six months

retroactive is nine months before age

70 and they won’t necessarily tell you

what they’re doing.

They will essentially just give you these

retroactive benefits because unless you

affirmatively tell them that you do not

want retroactive benefits, they have

the right, according to their traditions,

a staffer can just automatically give

you these retroactive benefits. It can

be even worse than this person. Sounds

like he lost three months in delayed re-

tirements credits. He could have lost

nine months in delayed retirement

credits.

AM: That’s scary. When you go in to

ask for your benefits, if you’re trying to

max out your Social Security, you have

to tell them specially, “I do not want

retroactive benefits.”

LK: You have to tell them, yeah, and I

wrote a column on that in Forbes, ac-

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tually today it got posted. If you Goo-

gle “Kotlikoff.” If you go to Forbes and

then – www.forbes.com and you search

for Kotlikoff, you’ll come up with that

column that I wrote today about it.

This is just another way in which So-

cial Security is screwing people out of

what they really have earned because

Social Security is thinking about this in

a very screwed-up way. They’re think-

ing about the idea that we do, we have

to give people their benefits as early

as possible, because they might die

and therefore they might not get their

benefits. Again, if they die, they’ll be in

Heaven; they won’t need any money.

The real concern is they live and they

live on a lower income because of So-

cial Security’s really stupid moves here.

and I – they used to tell people, Amber,

on their website that you should take

your benefit early because it’s a wash

whether you take your benefit later or

not and therefore you should take it

early because you might die.

That was on their website. I actually

had lunch with Steve Goss, who’s the

chief actuary for Social Security, about

maybe seven years, six years ago or so,

and I told him this is just crazy. This

is absolutely the wrong advice and be-

cause of our lunch, he changed the lan-

guage on the website. But it’s still very

much biased towards focusing people

on break-even on life expectancy and

the rules are such as to let these staff-

ers force you into doing something you

don’t want to do because they don’t

understand the difference between in-

surance and investing. This is – Social

Security is not an investment. It’s an

insurance product.

AM: I think that’s a really important

point to make, and, again, it just illus-

trates how important it is to be edu-

cated about these things before you go

and talk to Social Security. You men-

tioned that the real danger is living to

your maximum livable age and we did

have a question come in from Michael

Flippage, that he’s asking, “How can I

find out how long I’m going to live?”

I know we don’t know how long Mi-

chael’s going to live, but is there is an

actuarial calculator that you trust or

do you just sort of pick 100 and assume

that, or how can people think about

their life expectancy?

LK: What we really need is to have ta-

bles, and Social Security should be put-

ting this up on their website, which is a

distribution at what fraction of people

live to 100? What fraction live to 99?

How many live to 110? And how many

will live to those ages? To show people

the distribution of projected maximum

ages of life or ages of death. At what

age are people dying? That will give us

an idea of their – maybe that may not

be the right way to think about it, be-

cause the way, what I think really, to

think about it is to look at the people

who lived to the oldest age. What is the

oldest age to which people are current-

ly living, and there’s people out there

that are 105. My mom is 96. I think the

oldest age to which anybody has ever

lived that’s been documented is 122; it

was a French woman. I think that if you

don’t have any reason to believe that

your maximum age of life is for sure

some number that’s lower than 100,

think about using 100 or 110 or 120.

Whatever any maximum age of life

that’s that old or older will produce a

strategy that’s going to be the same

for a higher maximum age of life than

let’s say 100, I guess. The best strategy

if you have a maximum age of life at

100 is going to be the same as the best

strategy at 101 or 102, and that’s why

our Social Security software, https://

maximizemysocialsecurity.com, has

the default maximum age of life set

at 100. People can change that, but

we felt that 100 is the proper default.

We don’t focus at all on life expectan-

cy. We don’t have a software or any-

thing about break-even, even though

we have a lot of financial planners

who have been using our software, as

well as households, individuals use

our software; they’d like us to have

break-even analysis and I refuse to do

it because it’s dead wrong, and why are

they interested in break-even analy-

sis? Because what they’d like to do is

to get people to take their Social Secu-

rity benefits early so that these finan-

cial planners can then invest the mon-

ey and charge a fee on the investing.

That’s what’s going on here.

AM: That’s a great point. It’s not just

Social Security that’s going to give you

bad advice; your own financial adviser,

either it might be ignorant of how the

system works or it might have another

motivation. I think that’s a really –

LK: They may be innocent. They may

just not really understand how to think

about this. A large part of our book is

about just – the second chapter is real-

ly about how to think about Social Se-

curity as longevity insurance, because

that’s exactly what it is.

AM: All right, we’ve got a question

from Wade Laurent. He says, “My wife

and I work together. We’ve had about

the same earnings for many years. I

also have a small military pension.

With four years to go to 66, should

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we pay her everything from our small

company and not pay me to maximize

the overall Social Security benefit?”

LK: I think the IRS’s view would be,

you have pay people what they have

produced inside the ________, you can’t

just start allocating the income to try

and maximize the benefits. That’s, I’m

sure, illegal. There must be some pro-

vision in the law that says that manipu-

lating your reported earnings that way

is illegal. Having said that, you could

certainly have your wife work longer

and you work less and that would cer-

tainly pay her more because she is ac-

tually working more, and then again,

the software can tell you how much

that would raise her benefit and how

much that would reduce your benefit

and how much that would – whether

that strategy would increase the fam-

ily’s total lifetime benefits or reduce

them. There’s a way to find this out.

AM: A general question, Would it be

better for a couple, for each couple, for

each member of the couple, to earn,

let’s say $50,000 a year or would you

end up with higher Social Security ben-

efits if one spouse earned ____________

and the other earned $100,000, let’s

say, over the course of their lifetime.

Would that make a difference in the

couple’s overall benefit?

LK: It really depends on what their

earnings history has been up to

that point. It could be, for example,

that both spouses have been mak-

ing $80,000 a year. Now if you took

$100,000 and divided 50/50, that’s not

going to necessarily raise the benefit

for either of the spouses, because So-

cial Security looks at the highest 35

years of what are called index monthly

earnings. If we’re having one person

do all the work and earn 100 percent of

this, say $100,000, that would poten-

tially raise that person’s lifetime bene-

fits and therefore the family’s lifetime

benefits and not in any way reduce

the other person’s benefits because if

they even earn $50,000, it wouldn’t be

enough to raise their average. These

are good questions, but again, I think

you have to report honestly what peo-

ple are contributing to the company,

but a lot of questions like this, always

want to make sure that everybody un-

derstands that the IRS has a stake in

your answering these correct and put-

ting in the right values –

AM: You definitely want to stay on the

good side of the IRS.

LK: Exactly.

AM: We’ve got a question from Stan-

ley Sweener. He says, My wife is two

and a half years younger than he is, has

enough credits for disability, but not

enough for retirement. When she is 66

in six months, is there any benefit to

suspend or withdraw until age 70?

LK: Wife has enough benefits to col-

lect disability, but not enough to col-

lect Social Security on her own record.

I think if she can qualify for disability

benefits, she should go ahead and col-

lect those. That’s – depends on exactly

how old she is, but I think in almost all

the cases, you can’t get hurt by col-

lecting your Social Security – your dis-

ability benefits, if you’re not otherwise

going to be working. If you’re thinking

about giving up working or you real-

ly could work to collect disability, it

might be better to actually push along

and try to work even though you’re

working in pain or whatever. I assume

that that might not be easy for a lot

of people. It sounds like in this case

there is some margin of choice here.

The person is trying to decide “Should

I file for disability or not?” So they’re

not so disabled as to absolutely need

to file for it and in that case, earning

a full wage rather than what may be a

relatively small disability benefit is po-

tentially the better strategy in terms of

maximizing their lifetime income, but

it’s not just about Social Security. It’s

about if she’s making a full salary, then

it’s one fewer year that you have to pay

for yourself in retirement.

AM: Gotcha. We’ve got a question from

Kenneth Keller, and I think it’s proba-

bly on a lot of our readers’ minds. He

says, “I’m concerned about deferring

filings, since I think the government

will tweak the Social Security system

so bad to maintain solvency that my

future benefits may be reduced too

much. Should I file sooner rather than

later?”

LK: No, I don’t think that anybody

that’s close to filing or, let’s say 55 or

older, should worry about having their

benefits reduced, because the Amer-

ican Association of Retired Persons,

the AARP, has 60 million members.

This is the largest lobbying group in

the country. If Congress tried to cut

Social Security benefits, I think you’d

have a huge outcry, and those poli-

ticians would find themselves in bad

shape come Election Day. I think the

prospects here are that we’ll be having

– facing higher taxes on Social Security

contributions. I think we’ll see higher

taxation on Social Security benefits,

but I don’t see prospects for benefits

cuts, anyway not after somebody has

8www.bonnerandpartners.com

reached the retirement – I think if

somebody is close to retirement age,

close to 62 – I’m sorry 55 or over – I

think they have very small concerns

here about seeing their benefits cut.

AM: All right, so the message to Ken-

neth and folks who have that same

question is that, be patient, wait –

AM: Social Security?

LK: Yeah, don’t take a suboptimal

strategy because you think Congress

is going to cut your Social Security

benefits. It’s just –

LK: Exactly. Social Security’s in ter-

rible financial straits. It’s 33 percent

underfinanced. I want to be clear

about this and we’ve left an enormous

burden for our kids to pay for people

like you, Amber, your generation, and

my kids are a little bit younger than

you, and the country is broke. It’s 58

percent underfinanced. We need a

58 percent tax hike to pay for all the

spending the federal government has

in mind, including Social Security. If

you just look at Social Security, it’s 33

percent underfinanced. If you look at

a 33 percent tax hike immediately and

permanently, if you look at Detroit’s

pension systems before Detroit de-

clared bankruptcy, they were 20 per-

cent underfinanced. We have a huge

problem. It’s going to have to be dealt

with, but I don’t think it’s going to be

dealt with by abrupt cuts in Social Se-

curity benefits. I think it’s going to be

dealt with by higher payroll taxes and

higher personal income taxes and So-

cial Security benefits as well as taxes

in general.

AM: We have a question from a lot

of folks, who sound like they’re living

outside of the county. Vickie Mar-

tinez, for one, says, “When you live

in another country, is there a way to

continue to collect Social Security,

without living in the U.S.A. for six

months or returning to the U.S.A. one

day a month?”

LK: As far as I know – I may be wrong

in this, I’m not an expert on this – but

as far as I know, you can live 365 days

a year in a different country and still

collect your Social Security benefits.

They can be electronically deposited

in your U.S. bank account, maybe in

your foreign bank account, probably

just your U.S. bank account, and you

can then wire them to your foreign

bank account or just write checks

from your U.S. bank account. Where

you live does not affect your ability

to collect benefits. If you’re eligible to

collect Social Security benefits you’re

eligible, and you may be a green card

holder and the case is the same there.

You’ve been paying taxes. If you have

40 quarters of coverage, you can col-

lect retirement benefits, and even

if you just married an American and

you’re married for let’s say a year, you

can collect spousal benefits, even if

you’re not a U.S. citizen. You can also

collect widow’s benefits if he dies after

you’ve been married for nine months,

and he passes away.

AM: Let me keep an eye on – I know

we have a lot of folks that are consid-

ering retiring out of the country for a

lower cost of living and I think your

Social Security checks are going to go

a lot further in –

LK: We have a lot of Americans liv-

ing in Mexico right now, retirees,

and they come to the U.S. for medical

treatment covered by Medicare and

they’re getting their Social Security

checks, no problem.

AM: You did mention being covered

by 40 quarters. You’re talking about

how many credits you have, right?

We had a question from Jim Snyder,

wanting to know how to find out how

many credits he has.

LK: He should go online – it’s http://

www.ssa.gov, which is Social Securi-

ty’s website and check on – and pull

up his earnings history and he’ll see

how many quarters of coverage. You

don’t have to work a full year to get

four quarters. You can earn a lot in

one quarter and get four quarters of

coverage. You just work one quar-

ter of the year and still pick up four

quarters of coverage, so it’s import-

ant to know whether you have the 40

quarters, because if you’re close, you

certainly want to keep working and

get those 40 quarters and even if you

have the 40 quarters, again, Social Se-

curity is averaging 35 years of covered

earnings to figure out your benefits. If

it’s averaging over a lot of zeros, then

your benefit level is going to be low,

so working an extra year and having

that average include an extra year of

positive earnings can make a huge

difference to your lifetime benefits. It

can actually more than pay for the ex-

tra payroll taxes that you have to pay

for working that extra year.

Again, the Social Security software

that we have at https://www.maxi-

mizemysocialsecurity.com, can help

you figure this out because you can

see, What if I earned another year? If

I enter into this software another year

of earnings, how does my benefit go

up? How do my lifetime benefits go

up? You see that in two seconds.

9www.bonnerandpartners.com

AM: Great. We have a question from

Tom. Sorry, Tom, I’m not sure how to

pronounce your last name, so we’re

just going to call you Tom F., and I

think that this is a situation a lot of

our readers are in. Tom is a higher

earner, as is his wife, and he’s 60, and

his wife is 56, and he’s asking, “How

do we maximize our benefits?” I know

that’s a big, broad question and has

probably got a long answer, but if you

could talk generally about an older

spouse who is the higher earner and

the younger spouse who is the lower

earner, generally, what’s the right ap-

proach?

LK: Generally, Tom would want to

do this, which is to wait till his wife

reaches full retirement age and then

he should file for his retirement ben-

efit and suspend its collection. I’m

thinking he’s four years older than

she is; he might already be 70, and so

at 70 he certainly wants to start his re-

tirement benefits. I think in his case,

he doesn’t need to file and suspend

– he’ll just be taking his retirement

benefit at 70 –

AM: Tom is actually 60, and his wife

is 56.

LK: Oh, 56, so there’s a four-year

difference. When she’s at full retire-

ment age, he will be 70 and therefore,

he’s going to wait till – the optimal

strategy for Tom, I believe, is for him

to wait till 70, collect his retirement

benefit at its highest possible value,

again it’ll be 76 percent higher than

were he to start it at age 62, above and

beyond any inflation adjustment. His

wife then, at full retirement age, takes

just her spousal benefits. She doesn’t

file and suspend. She doesn’t file for

anything except her spousal benefit,

and then when she’s 70, she collects

her own retirement benefit. It could

be that her retirement benefit even

at 70 is less than her spousal benefit,

which is going to be equal to half of

Tom’s full retirement benefit. It won’t

be equal to half of Tom’s age-70 bene-

fit; it will be equal to half of Tom’s full

retirement benefit, which is a smaller

amount, but if she’s got a low earn-

ings history, her benefit may never get

any higher.

In fact, it would just equal half of his

full retirement benefit, so that’s got

the spousal benefit and that’ll be that,

and so he passes away, in which case,

she’ll get his age-70 benefit as a wid-

ow’s benefit, but on the other hand, if

she has a decent earnings history, it’s

likely that her age-70 benefit will ex-

ceed her spousal benefit and she’ll flip

onto this age-70 higher benefit, and

that’s going to maximize their joint

lifetime benefits.

AM: Great. We had a question from

Robert Perkins. His wife passed away

in 2010 and he now collects survivor

benefits. He’s going to turn 66 this

October and he’s wondering how his

spousal survivor benefits would im-

pact his Social Security payments?

LK: He’s taking widower’s benefits.

The question is whether he’s taking

his retirement benefit as well. If he’s

not, which I’m going to presume he’s

not, the optimal strategy –

AM: He’s not.

LK: Is likely to be for him to wait till

70 to take his retirement benefit. If he

takes his widower’s benefit, widower’s

benefit until 70, and then takes his

own retirement benefit.

AM: We just had a question come

in from Ina Hopp. She’s wondering

the flip side of the scenario that we

covered with Tom, where the higher

earner is the younger spouse, and is

there a different strategy in that sce-

nario?

LK: We’ve looked at these cases, too,

which is – you’d like the lower-earn-

ing spouse to be the one who takes the

spousal benefit at full retirement age,

but that requires the other spouse to

file for their retirement benefit, so

that would require filing early. We’ve

looked at this strategy, which we call

start-stop-start, and we talk about

this in our book, and in some cases,

it’s optimal to have the higher-earn-

ing younger spouse start their retire-

ment benefit early, even though that’s

going to reduce it in order to let the

older spouse collect a full spousal

benefit starting at full retirement age

and then when the younger spouse is,

again, the higher earner, reaches full

retirement age, they suspend their

benefit and they start it up again at

70. They stop it – they start it before

full retirement age, they stop it at full

retirement age, and they start it up

again at 70. That’s start-stop-start.

That is essentially a winning strategy

here in terms of the total family ben-

efits.

It reduces the younger spouse’s life-

time benefits, but it increases the old-

er spouse’s lifetime benefits, and, on

balance, the two may end up getting

more. I’ll just give you an example,

Amber, of an actual household. The

husband’s 63; the wife is 45; they have

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a disabled child, who was disabled be-

fore age 22. The wife is actually the

higher earner, but she’s only 45, so

she’s miles away from collecting any-

thing on her own record, but she’s

tried to stop working and take care of

the child. The 63-year-old – the op-

timal strategy our software showed

was for him to immediately file for his

retirement benefit, then to suspend it

at full retirement age, and start it up

again at 70, so this is the start-stop-

start, and that is going to permit his

child to collect a child benefit and his

wife to collect a child and care spousal

benefit. She can collect because she’s

taking care of a child beneficiary on

her husband’s – off of her husband’s

work record. That’s another benefit

that people aren’t aware of, which is

called child and care spousal benefits.

There’s something called a mother’s

benefit, if that 63-year-old was not

alive and died, the child could collect

a child survivor benefit, which is actu-

ally larger than the child benefit, but

then the wife could also collect – the

surviving wife could collect what’s

called a mother benefit, which would

be also equal to a big chunk of the de-

ceased spouse’s full retirement bene-

fit. In this case, the software said, yes,

it’s optimal to do the start-stop-start

strategy to maximize the family’s to-

tal collective lifetime benefits.

AM: Those are a lot of benefits to

keep track of.

LK: Yeah. You need to be aware – and

that’s where the book comes in. It’s

only – the book gives you a general

roadmap, and it’s really a very enter-

taining, fun read, because we were

pretty sacrilegious when it comes to

addressing what Social Security’s up

to – put it that way – and Paul Sol-

man, who’s one of my co-authors,

along with Phil Moeller, who’s a per-

sonal finance columnist; Paul is the

economics correspondence of long

standing for PBS NewsHour, and if

you’ve ever watched PBS NewsHour

and listened to Paul, you’ll realize in

an instant that he’s a really entertain-

ing person. He can convey on issues

better than anybody in the world as far

as I can tell and he writes extremely

well, so he and Phil have overcome my

economic nerdiness and put in a lot of

humor into the book, so the book is a

funny read as well as a useful read in

terms of making people money.

AM: Absolutely and I think you guys

did a great job taking a very hard col-

lection of subject matter and making

it readable and that was no easy feat.

LK: Thank you.

AM: We have a note coming from Pat

Nuremberg, who says, “Very import-

ant, Social Security Administration

doesn’t want to stop-start-stop any-

more. They only let one suspend the

benefits, if one is just beginning the

process, not if one has been collecting

since 62.”

LK: No that’s – she’s getting confused

between suspending a benefit and

withdrawing your benefit. It used to

be the case where you could withdraw

your retirement benefit filing decision

at any age. You could, for example,

file at age 62, start collecting your

retirement benefits at 69, withdraw

that decision and pay – you’d have to

pay back every single penny you re-

ceived, but then you could start from

scratch at a higher benefit level. Now

they only give you one year, and the

reason is that I and others started to

write about this option and then So-

cial Security clamped down on it; we

actually changed the law –

AM: They closed the loophole.

LK: But suspending a benefit is al-

lowed. You can start your benefit at

full retirement age, suspend it, and

then start it up again at 70; that’s per-

fectly legal, and again, a lot of people

at Social Security are confused be-

tween withdrawing your benefit and

suspending it, and a lot of people who

go to Social Security offices contact

me; they tell me that they’ve been told

this: “You can’t suspend your bene-

fit once you hit full retirement age.”

Absolutely, 100 percent wrong. You

can. It’s legal. Steve Goss was inter-

viewed the other day by Planet Mon-

ey. Planet Money is kind of reviewing

our book. It’s an NPR financial [Break

in audio] and the interview was with

me and Paul. They also… Steve Goss

is the chief actuary is a friend of mine,

and he said, right there, on the air,

yes, you can suspend your benefit and

start up later.

AM: Okay, if you get that advice from

Social Security, you can refer them to

their boss saying on the air that you’re

allowed to suspend?

LK: Yes. The best thing to do is just ig-

nore that bad advice, go to somebody

else at Social Security who knows

their stuff, or ask for technical experts

to talk to, because, again, you do not

want to ask Social Security what to do.

You want to tell them what to do.

11www.bonnerandpartners.com

AM: Pat is pushing back a little bit,

she said, though that she tried to ar-

gue, but they wouldn’t listen. You’re

advice to her would be to talk to some-

body else, go to a different office, get

someone else on the phone?

LK: Go to a different office. You can

call on the phone, yeah; I would go in,

talk to a technical adviser, a technical

expert, and they will – and if there’s

any problem, Pat could email me. She

can find my email address, and I will

tell her what provision of the Social

Security Program Operating Manu-

al System she needs to quote to that

Social Security staffer so that they un-

derstand what they’re supposed to do

here.

AM: Nice, that’s very generous of you,

Larry, thank you. Pat, you got Larry

on call. He’ll cite the law right back at

them, and I think he probably knows

more than the folks you’re talking to.

LK: Yeah.

AM: We just have time for a couple

more questions. Here’s one: James

from Houston, Texas. I know he’s a

Bill Bonner reader, because he’s ask-

ing, “How can I justify receiving bene-

fits, when there are fiats, that is to say,

not real money, but instead more debt

owed to Central Bank and that the

work they represent was stolen under

threat of violence from me, you, and

everyone else who has labored in this

country. The question is, is this dirty

money, and if it is, am I justified in

taking it?”

LK: What’s his name again, Amber?

AM: James.

LK: James. James, here’s what I’d say

to you. You’ve been forced to pay tax-

es; here’s a chance to get back money

that you feel you shouldn’t have had

to pay into the government. I don’t

share your view that we shouldn’t be

forced to pay taxes. We don’t live as

individuals. We’re in a society where

we need to have roads and defense

missiles, and public goods, and I also

believe that we should be forcing peo-

ple to save and buy insurance to have

disability, longevity insurance, and

have disability insurance and sur-

vival insurance because they will not

otherwise do it and therefore we will

all feel bad about these people who

don’t save for themselves or insure for

themselves, and then we’ll have kind

of a bad outcome relative to the one

in which the government forces us

to do something to take care of our-

selves in these bad events and that’s

also a public good if you look at it as

an economist.

If we don’t care about Joe, and Joe’s

not taking care of himself, we have a

couple of options here: We could each

give him a penny or two, but that’s

not going to be necessarily, going to

make us feel that good about Joe. We

could try and free ride and let some-

body else take care of him, or we

could force [Break in audio]. I think

the right answer’s to force Joe to take

care of himself, to save for his own

retirement through a forced saving

system, which is what Social Security

is. Now, that said, Social Security has

also been engaged in a massive Ponzi

scheme, so it’s not just forcing peo-

ple to contribute, but it’s taking that

money and giving it to older people

and then forcing younger people to

pay for those older people and con-

tinuing raising the benefits and con-

tinually going after younger people to

pay older people as opposed to having

a funded system where people really

have money in their own account; it’s

accumulated and they get a return on

it. That’s never been the way Social

Security’s operated. I agree with you

on a lot of issues, but not everything.

AM: Gotcha. Do you think that it

is possible for there to be a system

where folks are forced to pay in, but

the money is actually treated with re-

spect? Do you think that’s anything

that might happen in the future?

LK: I hope so. I have a proposal called

the Purple Social Security Plan, which

if you go to http://www.thepurple-

plans.org, purple is a mixture of red

and blue and so these are plans that

Republicans and Democrats can both

get behind. I have a proposal for how

to fix Social Security that would in-

volve personal accounts of progres-

sive contributions by the government

to low contributors so we have a pro-

gressive system, contribution sharing

between spouses. All the funds in-

vested in an index fund, so that Wall

Street doesn’t earn a penny on any of

this and the government guarantees

a zero real return, so that there’s a

downside to investing in the market

and then you get your money out of

this in an inflation-protected pension.

There is a very straightforward way

that we economists think things could

be fixed, and I’m hoping that some of

the presidential candidates will start

taking notice of this proposal.

AM: Yeah, we’ll see if that plays out

during the election. Just one more

question: John K. from Cottonwood

Heights, Utah, asks, “Have the Social

Security rules changed since the book

was published?” I’m just going to add

12www.bonnerandpartners.com

an add-on question to that: How you

going to keep up – how is somebody

supposed to keep up with the changes

in the laws?

LK: They can review my columns at

PBS NewsHour or at https://www.

maximizemysocialsecurity.com. All

my columns are posted so that – and

I’m writing about any changes, so in

December there was terrible change

made that affects disabled people,

people on disability benefits, that de-

prives them of the ability to get a full

spousal benefit. In our book we are

talking about a strategy for your dis-

abled spouse to collect a full spousal

benefit, but one of the people that had

read one of my columns tried to actu-

ally get a full spousal benefit, having

been disabled, and Social Security, in

the dead of night, December 23, 2014,

they changed several sentences, and

deep in the bowels of this Program

Operating Manual System, and they

instantly deprived millions upon mil-

lions of disabled people from the same

opportunity that nondisabled people

have, which is to collect a full spou-

sal benefit and in the case of divorcés,

you can collect base divorcée – exes

can collect a full spousal divorcé ben-

efit.

In a married couple, only one can

collect a full spousal benefit given

the way the rules work, but anyway,

there’s an example of something that

we had wrong in the book, because

they changed the law after we wrote

the book, and we’re just going to keep

updating the book through time so

there’ll be probably a 2016 or 2017

edition of it that has all the updates.

AM: Okay, so look out for a new edi-

tion of Larry’s book. In the meantime,

read his columns on PBS, and that’s

all the time we have. Larry, we so ap-

preciate your time, and folks who are

listening, we’ll post the recording on

the Bonner & Partners website and

let you know just as soon as it’s up.

If you want to hear more from Larry,

like we said, he publishes every week

on PBS, just search for Ask Larry and

you can find all his past columns and

his excellent Social Security software

at https://www.maximizemysocialse-

curity.com. Again, you can find every-

thing at https://www.maximizemyso-

cialsecurity.com. Larry, thank you.

AM: Thank you.

LK: And to everyone listening, have a

great night.

LK: Thank you, Amber. Lovely to be

with you.

AM: Take care.