Claiming Social Security benefits is often talked about in formulas, as if it’s always straightforward. Nonmathematical factors—and feelings—should be given their due weight, it turns out. More in this week’s chat.
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We have written from time to time about the role of Social Security retirement benefits in your plans and planning. I have new perspectives on the process, based on my new status: I’m a Social Security recipient!
I’ve got two interesting and useful lessons from my process so far.
First, in my separate discussions with two Social Security Administration employees, a piece of misinformation emerged. A written summary of a telephone appointment contained a major error, one that would have had negative consequences if left uncorrected.
Second, working through the actual numbers, the arithmetic favoring one start date versus another was not nearly as compelling as I expected. Claiming benefits is often talked about in formulas, as if it’s always straightforward. Nonmathematical factors—and feelings—should therefore be given due weight, it turns out.
Because of the first lesson, I feel even more committed to join each of you as you go through the actual application process. The information is murky, humans can make errors, we can lose pivotal details in the mix… But I would love to try to help make sure the process comes out as you would like it to.
The second lesson underlines something we’ve always believed: your situation, your feelings, your preferences and vision for your cash flow needs absolutely must be part of the equation. Nobody knows the date going on their death certificate, so there is no way to “prove” in advance the “best” time to claim Social Security.
What will work out best for you in your real life? That’s the question.
Social Security is a significant fraction of retirement income for most people, so taking some time to examine and explore options well ahead of time makes sense. We’re here for that. If you are within a few years of retirement, keep watching this space: we will keep discussing what options are available in more detail and how we might approach the choices.
Clients, if you are ready to talk about your retirement plans and planning, please email us or call.
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Play the audio version of this post below:
Social Security is a key piece of the retirement puzzle for most people. The benefits can be worth a substantial amount of money, Each one of us must make decisions about our participation.
We advocate getting facts specific to your situation before making up your mind about what to do. There is a lot of information floating around, not all of it accurate. If you do a Google search on the term “social security” you find more than six billion references.
But there is only one Social Security Administration, and its official websites may be a good place to begin. The reality may be more complicated than indicated by articles in the media.
Recently a client wondered about whether to defer retirement benefits to age 70. Supposedly the benefit of waiting past Full Retirement Age would be an 8% increase per year, calculated to the month. But when they looked at their online benefit statement at SSA.GOV, the benefit of waiting to age 70 benefit was 17% greater than indicated by the 8% formula.
How could this be?
Social Security retirement benefits are based on your best 35 years of earnings, indexed for inflation. Working beyond Full Retirement Age would replace a low wage year from earlier in life with higher current earnings, for this client. So there were two factors working in favor of deferral, not just one.
Pin down the specific facts for your situation before making up your mind. Clients, if you would like help with this or to talk about anything else, please email us or call.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
This is an individual example and is not representative of any specific investment. Your results may vary.
Yes, at age 62 I could claim Social Security benefits. But I won’t.
After talking with you for decades about your Social Security benefits and the tactics you might use in claiming benefits, I’m looking at my own situation. There may be lessons in it for others, so we’ll talk about it here.
Suppose my benefit at age 62 would be $1,500. That’s $18,000 a year! Why wouldn’t I claim it?
1. If I wait until later, my benefit will be larger. That’s $2,128 monthly at full retirement age (66 and 4 months) or $2,856 at age 70.
2. If I claim now, since I want to keep on working, my benefits would be reduced by 50 cents for every dollar I earn over about $17,000.
3. My benefits would be partly taxable because I would have other income of over $23,000 for the year, basically. (It’s complicated—consult your own tax advisor.)
4. Flexibility: A decision to defer claiming Social Security can be changed at any time in the future, if circumstances change.
Since I want to work to age 92, my guess is that I won’t claim until age 70. But that’s just me. Under what circumstances would it make sense to claim at age 62?
A. If your spouse qualifies for benefits twice as large as yours, check into claiming on your record at age 62 and changing to a claim on your spouse’s record at full retirement age. This gives you some benefit from your earnings record, which might otherwise go unused.
B. If you have an impaired life expectancy, an earlier claim might make more sense. A person who plans to claim at age 70 but dies at 68 ends up collecting nothing.
Clients, this is intended to illustrate some of the basic considerations about Social Security strategy. You can learn more at www.SocialSecurity.gov, where you may sign up for a personal account and obtain personal benefit estimates at any time.
Please email us or call if you would like to discuss this at greater length.
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.
This is a hypothetical example and is not representative of any specific investment. Your results may vary.
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