You might not think there's a connection between chocolate chip cookies and Social Security. But there is one, according to David Freitag, a financial planning consultant and Social Security expert for MassMutual.
Separately, the ingredients to make chocolate chip cookies are just okay. But when you mix the ingredients together and bake the mixture, well, that’s when the magic happens. “The key is putting them together,” says Freitag.
And the same can be said of Social Security—or at least for those who meet the right criteria.
One ingredient, according to Freitag, is delayed retirement credits achieved through voluntary suspension. And the other is retroactive filing.
Here’s an example of how it might work. Let’s say a worker who has reached full retirement age but hasn’t yet filed for Social Security gets furloughed from their job, and needs some cash for living expenses. That person could apply for Social Security and request a retroactive payment. Our worker would then get a lump sum check representing six months of benefits.
Now, let's also say our worker doesn’t want to miss out on delayed retirement credits. So, after getting the lump sum check, our worker then voluntary suspends their Social Security benefit, starts earning delayed retirement credits, and then re-applies for Social Security again at age 70.
“At age 70, he wouldn't have missed all that much from his total benefit,” says Freitag. “He's offset that early filing with those delayed retirement credits. So in this particular case, the combination is worth more than the sum of the parts.”
Of course, having your cake (or in this case, chocolate chip cookie) and eating it too is not without its drawbacks.
If you voluntary suspend your benefit and someone is attached to your record they would be cut off, says Freitag. “So if their spouse was attached, that might not work,” he says.
Plus, if you're paying for Medicare from your Social Security benefit those payments would be turned off, and you would have to pay Medicare directly for Part B coverage.
“So there are a couple of reasons why this might not work, but it certainly gives people another choice to look at,” and, for some, it could be a good solution, says Freitag.