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How to maximize your most valuable retirement asset

Most people aren't careless with the things they value the most. Surprisingly, one exception is how most people treat their most valuable retirement asset -- Social Security. Half of all Americans start their Social Security benefits at the earliest possible age (age 62), which generates the lowest amount of lifetime retirement income. For many people, that's a careless mistake.

A new toolkit released last week from the National Association of Social Insurance (NASI) provides straightforward guidelines regarding your Social Security benefits: If you really need it, take it early because you've earned it. But if you have the choice, it pays to wait, even just a few years.

One of the most innovative features of the NASI toolkit is a three-minute video that delivers the most important information in simple, easy-to-understand language. You can learn when your full retirement age is and see an example that demonstrates the power of waiting to start your Social Security benefits. In the video's example, you could increase your monthly income by $570 by waiting from age 62 to age 70.

The NASI video points out that the longer you live, the more important your Social Security benefits will be. This is one good reason why estimating your life expectancy is a critical part of your retirement planning. By calculating this, many people may find that they could live a long time in retirement. If that's the case, consider Social Security to be your insurance against outliving your money.

As I've written before, delaying your Social Security benefits has the potential to boost the total amount of income you'll receive over your lifetime by $100,000 or more. But that's not all. If you're married, delaying the benefits of the primary wage-earner (often the husband) can significantly boost the benefits of the surviving spouse (often the wife). This move alone has the potential to increase the total payout a surviving spouse could receive by $46,000. Other smart claiming strategies have the potential to boost a spouse's lifetime payout by $90,000. These examples show that making smart choices about Social Security benefits has a big payoff.

Information provided by the NASI explains why Social Security is the most valuable retirement asset for most people. According to the NASI, the latest Survey of Consumer Finances found that seven in 10 householders age 55 to 64 had less than $100,000 in their retirement accounts in 2010. Yet it would cost about $388,000 to buy the average Social Security benefit of $1,296 per month, including the value of the increase for inflation that you receive each year and the value of the surviving spouse's benefit.

Suppose you're one of the lucky households that has $100,000 in retirement savings. My examples above show that you can more than double your retirement savings with the increase in Social Security benefits you'll realize by making smart choices with your most valuable retirement asset.

The NASI toolkit contains a concise one-page fact sheet that summarizes the basic things you need to know about Social Security. It also includes an easy-to-read 16-page brief that answers many questions you may have about Social Security. It includes a powerful suggestion that will help you delay Social Security -- to use your retirement savings to help cover your living expenses while you're delaying your Social Security benefits.

Cynics may say they'll never receive anything from Social Security. Watch the NASI video to the end or read its 16-page brief all the way through to see why these cynics are wrong.

The NASI toolkit is a great way to learn about your Social Security benefits. This nonprofit, nonpartisan organization comprises the nation's leading experts on social insurance, and its mission is to increase public understanding of how social insurance contributes to economic security. It's not out to make a profit -- it's only trying to help people like you and me make the most of an essential retirement asset.

Steve Vernon

View all articles by Steve Vernon on CBS MoneyWatch»
Steve Vernon helped large employers design and manage their retirement programs for more than 35 years as a consulting actuary. Now he's a research scholar for the Stanford Center on Longevity, where he helps collect, direct and disseminate research that will improve the financial security of seniors. He's also president of Rest-of-Life Communications, delivers retirement planning workshops and authored Retirement Game-Changers: Strategies for a Healthy, Financially Secure and Fulfilling Long Life and Money for Life: Turn Your IRA and 401(k) Into a Lifetime Retirement Paycheck.

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