Viagra and Social Security? Why Uncle Sam May Owe You Alot of Money

According to the Center for Retirement Research, Americans leave roughly $25 billion dollars in unclaimed  Social Security benefits on the table each year. It’s not surprising.  Hidden in the more than 2,700 rules that govern Social Security, are twists and turns that are difficult for even seasoned financial professionals to understand.

[Related: How the ‘Old You’ Can Help the ‘Young You’ Save for Retirement]

One of the most commonly overlooked benefits is what is commonly referred to as The Viagra Benefit. Stay with me, I once interviewed a family who used this to save $1,000 a month for their daughter’s college education.

• Eligible dependents include: Biological children, adopted or stepchildren, or dependent grandchildren, as long as the child is under 18-years-old.
• Each qualified child in your family can receive up to half of your full benefit amount:  Say you qualify for $2,000 a month; your child can get $1,000.
• Your child’s money does not reduce the size of your payments.
• There is a limit: The total amount your family receives — including you and your children — is capped between 150 and 180% of your benefits, depending on when you were born.  Say, for example, you qualify for a payment of $1,000 a month. The total benefits you and your family receive cannot exceed $1,500 – $1,800 under any circumstance.
• You can, however, delay receiving your payments to avoid bumping up against those limits.

“That’s something that is becoming increasingly important now for people who are having children later in life,” says the Urban Institute’s Richard Johnson.

Matthew Allen and Catherine Hormats co-founded a company called Social Security Advisors.  They say 70% of Americans leave Social Security money on the table, averaging $120,000 per couple. For $24.95, they give clients an automated analysis and plan that helps them maximize their Social Security benefits. For $124.95, they provide clients with personal counseling.

Allen says many of his clients are also surprised to learn that they can claim benefits after they’re divorced, even if their ex has remarried.

• To qualify, you must be 62-years-old.
•  Your marriage must have lasted for at least 10 years.
•  The divorce has to be at least 2-years-old.
• Your ex has to qualify for social security benefits, but does not have to be claiming them.
• Your ex’s benefit has to be worth more than yours.
• If you meet those guidelines, your benefit is equal to half of your ex’s:  If she is eligible for $2,000 a month, you get $1,000, even if they remarry.
• If ‘you’ remarry, all bets are off; unless your new marriage ends by death, divorce, or annulment.

If you currently have a financial adviser, be sure to ask if she has training in Social Security planning.  If not, you may want to find a financial professional who does.