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Get What's Yours: The Secrets to Maxing Out Your Social Security. By Laurence J. Kotlikoff, Philip Moeller and Paul Solman (eds). Simon & Schuster, 2015, ISBN 978-1-476-77229-5, 324 pages.

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Get What's Yours: The Secrets to Maxing Out Your Social Security. By Laurence J. Kotlikoff, Philip Moeller and Paul Solman (eds). Simon & Schuster, 2015, ISBN 978-1-476-77229-5, 324 pages.

Published online by Cambridge University Press:  22 December 2015

Sita Nataraj Slavov*
Affiliation:
George Mason University and NBER
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Abstract

Type
Book Review
Copyright
Copyright © Cambridge University Press 2016 

As age 62 approaches, most Americans must make decisions about when to claim Social Security. Delaying claiming results in a higher monthly check, an actuarial adjustment intended to compensate for the fact that those who claim later will likely receive benefits for fewer months. But as it turns out, this adjustment is not actuarially fair for many (possibly most) individuals. That is, the expected present value of benefits can be increased through use of the right claiming strategy, which often involves delaying retirement benefits and taking full advantage of any auxiliary (survivor and spousal) that may be available. And the stakes can be high, amounting to tens or even hundreds of thousands of dollars in lifetime benefits.

Despite these high stakes, most people claim Social Security either as soon as they reach age 62 or upon stopping work – a strategy that is rarely optimal. It is a puzzle why so many people appear to leave so much money on the table. One hypothesis is that most people are simply unaware of Social Security's complex rules, which must be understood in order to take advantage of less conventional claiming strategies. If that is correct then a book such as this might get people to change their claiming choices. The book provides an easily digestible introduction to Social Security's rules, as well as advice on optimal claiming strategies under a variety of different circumstances. As the authors point out, given the stakes involved, ‘claiming every possible dollar in Social Security should be a national pastime’ (p. 123).

To take an example from the book (p. 127), consider a two-earner couple in which the wife is aged 67 and the husband 63. The authors suggest that both spouses wait until age 70 to claim their own retired worker benefits, allowing these benefits to reach their highest possible value. However, while waiting, the husband can receive a spousal benefit based on the wife's record starting at age 66. At age 70, the husband switches to his own retirement benefit, which will have grown through delay. The spousal benefit – which amounts to half the working spouse's full benefit – was originally designed with one-earner couples in mind. But strategic use by two-earner couples, as in the preceding example, is permitted under Social Security's rules and can substantially boost lifetime benefits.

There are numerous other, more complex case studies in the book involving disability benefits, same sex marriage, multiple marriages and divorces, widowhood, and children. These are all used to illustrate, in an easily accessible way, how Social Security's rules work and what factors individuals might want to consider in making claiming decisions. In addition, the book provides practical advice about dealing with the Social Security Administration. All of this will surely provide readers with plenty to consider as they make their own Social Security claiming decisions. Through use of humor and carefully chosen anecdotes, the authors have also done a remarkably good job of making a snooze-worthy topic – Social Security's rules – genuinely entertaining. Consider, for example, the hypothetical William H. Gigolo (pp. 119–120), who marries and divorces a series of high-earning spouses, living off their income while they are working, and then calculatingly proceeds to maximize the divorced spousal and survivor benefits he receives in retirement.

Still, one wonders what might happen as these Social Security ‘secrets’ become more widely known. Clearly if everyone followed the authors’ advice, it would put a strain on government coffers. How might policy makers react? Might they, for example, take steps to limit the strategic use of spousal benefits by two-earner couples? This has happened with other claiming strategies. In the past, individuals were able to take advantage of a ‘free loan’ from Social Security, which permitted them to claim benefits at age 62, undo that decision at age 70 by repaying all benefits received (without interest), and re-claim immediately, taking full advantage of the higher benefit available through delay. That strategy was eliminated in 2010 just as it began to get attention. Now, a do-over is only permitted if benefits were started less than a year ago. This kind of discussion clearly goes beyond the scope of the book, which is intended to provide advice about how to optimize claiming under Social Security's current rules, but it is interesting to ponder nonetheless.

One also wonders whether a secondary purpose of the book is to get people to think about broader policy questions surrounding the design of Social Security. The authors frequently take shots at some of the seemingly arbitrary rules governing benefit collection. For example, why is the family maximum benefit – which caps the total amount that can be collected on one worker's earnings record – more generous for high earners than low earners? In a benefit formula that aims to be progressive, ‘[t]he way this benefit is calculated doesn't make sense to us’, say the authors (p. 48). More generally, readers might be prompted to consider whether we really want a system where figuring out optimal claiming strategies needs to be a ‘national pastime’, wasting valuable time and energy that could otherwise be spent on genuinely enjoyable pastimes. Indeed, in the final chapter, the authors provide their own views on Social Security reform. Here, the authors disagree considerably, with Kotlikoff complaining that the system's ‘complexity is beyond belief’ (p. 247), Solman countering that ‘[i]t's simply a fantasy that laws and policy can simply be made simple’ (p. 241), and Moeller arguing that despite its flaws, Social Security does its job ‘very efficiently and with a cost structure that would be impossible for any private company to match’ (p. 251).

Regardless of what policy conclusions one draws from the book, the bottom line is that it is chock full of useful advice for individuals approaching retirement age. At the very least, it should prompt readers to invest some time in thinking about their claiming decisions.