Finance and Economic

Barring a change in the rules, my wife, Georgina, and I are set with our plan for when to claim — or wait on — Social Security benefits.

Using a little known “file and suspend” strategy, I expect us to receive higher combined benefits over the long run, while protecting Georgina if I die first. We also expect to save on taxes.

Discussed in a working paper for the Pension Research Council at the University of Pennsylvania’s Wharton School, this strategy calls for the lower-earning spouse — Georgina in our case — to file for benefits first under her work record.

Depending on their circumstances, some spouses may wish to do so as early as possible, which is age 62. Georgina will wait until her full retirement age of 66 in 2010 primarily because her earnings from freelance work would reduce her benefits until then.
As the higher-earning spouse, I will then “file and suspend” when I reach my full retirement age of 66 in 2011.

That means I will file for my full retirement benefits but immediately ask that they be voluntarily suspended, which can be done in the remarks section of the application, said Dorothy Clark, a Social Security spokesperson.

I then will wait to collect until I am 70. If we need money before then, we can tap our IRAs and other retirement plans.

Why do this?

•Once I file for benefits, even if I immediately suspend them, Georgina will become eligible for the spousal benefit.

•This benefit — 50 percent of what I would have received at full retirement age — will be higher than the benefit under her work record. (If the lower-earning spouse files for benefits before full retirement age, the spousal benefit is reduced.)

•My benefit at age 70 will be considerably higher than at 66. For every year I wait up to age 70, I get a credit of 8 percent a year on top of annual cost-of-living adjustments.

•If I die before Georgina, instead of the spousal benefit, she would receive a survivor benefit equal to whatever I was getting (or, generally, was entitled to get if I die before age 70).

•By taking withdrawals from IRAs if needed, we reduce mandatory distributions after age 70 1/2, potentially keeping more Social Security benefits tax free.

Intrigued? The paper for the Pension Research Council argues that the full value of delaying Social Security, particularly for the higher-earner spouse, has not been properly measured because the tax advantages and spousal, survivor and cost-of-living-adjustment benefits have not been adequately considered.

“In the future, Social Security benefits will become increasingly valuable due to their tax-favored status, inflation protection, survivor protection and longevity protection,” said the paper, “Rethinking Social Security Claiming in a 401(k) World,” by James Mahaney and Peter Carlson of Prudential Securities. (Even under the worst-case tax scenario, depending on other income, 15 percent of Social Security benefits are tax free. Under the best-case scenario, all is tax free.)

“This strategy gives you the best of both worlds,” that is, allows the lower-earner spouse to collect spousal benefits while the higher earner waits to receive higher benefits later, said Taylor M. Gang, an investment adviser with Evensky & Katz in Coral Gables, Fla.

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National Fuel Gas Co. and New Mountain Vantage GP, L.L.C., a leading shareholder of the energy company, have settled a disagreement involving several issues.

As part of the agreement, Williamsville-based National Fuel will increase the size of its board to 11 directors from 10 and to nominate, as a new director, Vantage's candidate Frederic Salerno.

Salerno will receive no compensation for his board service for as long as Vantage continues to own common stock of the company. The company said Salerno will be added to the original slate of the following continuing directors: Robert Brady, Rolland Kidder and John Riordan.

All four candidates will be nominated to serve for a term to expire in 2011. Upon election to National Fuel's board, Salerno will join the compensation and the nominating/corporate governance committees.

The parties, who have been at odds for several months, also agreed to resolve a dispute involving development of acreage Appalachian, including the Marcellus Shale, propetty which is considered extremely valuable.

Also, National Fuel said that it intends to evaluate the divestiture of its assets in the Gulf of Mexico as one key alternative if performance targets set by the company are not met during this fiscal year.

"We have always sought to achieve a productive relationship with National Fuel's management and Board for the benefit of all shareholders," said a statement David DiDomenico, managing director of Vantage. "We believe that together we can successfully advance the Company's interests by focusing on developing the Appalachian acreage, including the Marcellus Shale, by carefully evaluating ongoing and future activities in the Gulf of Mexico, by considering Vantage's other suggestions, and by taking important steps to improve corporate governance."

Shares of National Fuel Gas (NYSE: NFG) closed up 18 cents thursday to $41.35.

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E*Trade Financial Corp , the online brokerage crippled by mounting losses at its mortgage business, said it sold about $3 billion in mortgage-backed securities and reduced wholesale borrowing levels by about $3.5 billion.

The company said it ended the year with $190 billion in client assets and $33 billion in cash.

E*Trade on Tuesday told Reuters that it will exit the U.S. institutional sales business eliminating about 30 jobs.
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