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DAVID GREENE, HOST:

Let's continue our conversation about baby boomers and their finances. Today, we're talking about Social Security. Today's boomers can start collecting full benefits at age 66, but they can tap in early at age 62. You can also delay receiving Social Security benefits until you turn 70. With those three age posts in mind, we're going to talk with a woman who has made explaining Social Security almost into an art form.

Mary Beth Franklin, of Investment News, it is great to have you back on the program.

MARY BETH FRANKLIN: Thanks so much. I'm thrilled to be here.

GREENE: All these decisions about these three ages, whether to begin getting your benefits, whether to not begin getting your benefits, I mean, it sounds very complicated. And, you know, I don't want to get into too many numbers, but give me a sense for how important Social Security benefits are to an American. I mean, how much do they rely on these benefits when they get older?

FRANKLIN: For the majority of American retirees, Social Security is the only form of guaranteed cost of living-adjusted income they will ever see, and for many retirees, it is their only source of income. So the importance of making a smart decision about how and when you claim benefits can't be underestimated.

GREENE: If you make the wrong decisions, you might be really in trouble.

FRANKLIN: Absolutely. And in fact, people in the past usually took it at 62 because they could. You know, frankly, why not? But the idea of getting the biggest benefit you can, that you're entitled to, will not only be a big benefit now, but then each year when those cost of living adjusted increases are applied, you're benefit keeps growing year after year. And I'll tell you, when you're 85, you're going to be really glad you've got a big benefit.

GREENE: OK. So first big decision comes when you turn 62 years old. I mean, what should someone be thinking about?

FRANKLIN: Well, at 62, yes, you can claim benefits, but let's say you're entitled to $1,000 a month at your normal retirement age of 66. If you take it at 62, you're going to take a 25 percent haircut the rest of your life.

GREENE: And be getting less forever.

FRANKLIN: Right. You'll get $750 a month instead of $1,000 a month. So you will get smaller checks for a longer period of time.

GREENE: So who should actually think about taking these benefits at 62, if people should?

FRANKLIN: If you have health issues and are unlikely to live to your normal life expectancy, which for most Americans is about 78 or 80, go ahead, take it early. But the one caveat is if you plan to keep working while you claim Social Security benefits, you're going to end up losing some of those benefits, basically giving them back.

So my number one rule is if you plan to keep working, don't take Social Security benefits before your normal age of 66. Once you get to 66, this thing called the earnings cap that can claw back some benefits goes away.

GREENE: Basically, if I'm still working between 62 and 66, better idea to not take the benefits because I'll be cancelling those benefits out by working. At 66, I could both work and get some of those benefits going.

FRANKLIN: Precisely, yeah.

GREENE: What about married couples. I know there are a lot of different scenarios for claiming spousal benefits, getting your Social Security for your work, for your spouse's work. I mean, break this down for us.

FRANKLIN: There are enormous opportunities for married couples. What most married couples should think about when they make a decision: It's not two individual decisions. You're an economic unit. What most married couples want to do is lock in the largest possible survivor benefit because when one spouse dies the largest benefit will remain.

So you want the highest earner, which, frankly, is still usually the husband, to delay taking benefits as long as possible because not only will he get a bigger benefit during his lifetime, but if he dies first, the wife will then get 100 percent of what he got during his lifetime. Her smaller benefit would go away.

GREENE: So it might be worth the larger wage earner to wait until age 70 to really maximize how much he or she is getting so when that person dies, that's the larger benefit that the spouse will be getting with the survivor benefit.

FRANKLIN: That's true.

GREENE: Let me ask you, a sad reality in this country, a lot of people get married and get divorced. How does that work? How does that factor into your Social Security decision?

FRANKLIN: I would say that the least understood fact about Social Security is that many divorced spouses are entitled to benefits on their ex. The basic rules are the marriage must have lasted for at least 10 years, and you must be currently unmarried. Under those circumstances you can claim benefits on your ex as long as he or she is at least 62 years old. They don't even have to be claiming their benefits. As long as they're eligible to claim benefits, I am, as a spouse, if I'm at least 62, can also claim.

GREENE: But let me make sure I understand this. So if I'm married, you know, from age 22 to 33, I divorce that person, but they were making a lot of money. Years down the road, when I'm retiring, as long as I'm not married, I could go back and claim benefits based on that ex-spouse?

FRANKLIN: Absolutely. Even if you were married to other people in between. And what I like to say, I want every divorce attorney in the country to realize that marriage vows say until death do us part. I would like them to insert a phrase that says, or at least a decade because I can't tell you how many women I know that were married...

GREENE: Nine years.

FRANKLIN: ...to people eight years, nine years. I want to smack them. It's like, do you realize what you gave up?

GREENE: These types of financial decisions not always the most romantic, but, you know, it's a reality that people need to deal with.

FRANKLIN: Absolutely.

GREENE: Mary Beth Franklin, thanks for all that information, really helpful, good to have you.

FRANKLIN: Thank you.

GREENE: That's Mary Beth Franklin of Investment News.

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