Social Security Q&A: Should A Terminal Cancer Patient Follow The Social Security Office's Advice To Take Benefits Immediately?Commentary by Laurence Kotlikoff
August 09, 2014
Social Security may be your largest or one of your largest assets. How you manage it, by deciding which benefits to collect and when, can make an absolutely huge difference to your lifetime benefits. And those with the highest past covered earnings have the most to gain from maximizing their Social Security.
I’ve been answering questions and writing columns about Social Security each week for the past two years on PBS NEWSHOUR’s website. The editors at Forbes asked me to post a Q&A each day from those columns. To see all my columns, please go to my software company’s site, www.maximizemysocialsecurity.com, and click More Press below the WSJ quote.
Today’s question centers on whether a terminal cancer patient should follow the advice he got at the Social Security office and immediately begin receipt of his benefits. It highlights the importance of knowing each spouse’s information as well as planning for each spouse.
Larry Kotlikoff: This is a question I was asked in person by a 67-year-old married physician who told me he had terminal cancer and could live another five years at most. You could not meet a nicer or better man, and he’s facing his situation with joy for all the good he’s done and experienced and with determination to live out his remaining days helping others, all while living life to the fullest.
In between telling me about his recent and pending fly fishing expeditions, which he can partake in thanks to his oral chemotherapy, he asked if he should follow the Social Security office’s strong advice to take his benefits immediately so that he’d get something back for all his years of contributing.
I told him this probably was bad advice for the following reason: Each year between full retirement age and 70 that he waits to collect will increase by 8 percent (not compounded) the real (inflation-adjusted) amount of Social Security survivor benefits his wife, who hadn’t worked much, will receive for the rest of her life after he passes away. For example, if he survives to 70, his wife will receive a 24 percent higher survivor benefit check every month.
The reason the wife’s work history matters is that she’ll get a check equal to the larger of her own retirement benefit or her survivor benefit. If she had earned more than the doctor and waited, say, to age 70 to collect her retirement benefit, the survivor benefit wouldn’t matter because she’d never collect it.
The moral to this story is to be very careful taking Social Security’s advice and to bear in mind that your decision about when to take your own retirement benefit will impact what your spouse and, indeed, your ex-spouses to whom you were married for 10 or more years, will receive in survivor benefits.
Social Security Administration employees are specifically trained not to advise people what to do but instead to explain their options and let them decide what is best for them. Some employees hesitate to mention what will happen in the event of a person’s death simply because it’s an uncomfortable subject. So we often have the worst of both worlds: They give advice when they shouldn’t and then often give only partial advice.