5 Questions You Must Ask Before Claiming Social Security
Hello everyone. Welcome back.
If you are a working man or woman who is approaching retirement, there is one decision you must make, and if you make it incorrectly, the result can be the loss of hundreds of thousands of dollars of your retirement income. That’s the Social Security Claiming decision.
Social Security Gets Personal
Although the decision to claim Social Security is constant among all eligible retirees, the timing of the decision is not. It is a highly individualized choice that is influenced by your personal circumstances and made more complex by the nature of the Social Security System itself.
Hi, I’m Chuck Lewandowski CERTIFIED FINANCIAL PLANNER™ professional. and today, I’m going to discuss some of the variables that you should consider as you make your choice to claim social security benefits.
Qualifying for the Benefit
Let’s get started with some background. Your Social Security retirement benefit is based upon your work history and earnings. You earn “credits” for your time in the system. You become eligible if you have at least 10 years of paying into the system. For this you receive 40 “credits”. You are eligible to claim a benefit under your own work record from age 62 until age 70.
The System will review your employment history and determine a benefit which will be paid at what it calls the “Full Retirement Age” or FRA.
What is Full Retirement Age?
Full Retirement Age is a very important concept. It is the age at which you receive 100% of your benefit.
Here’s a brief description of how this works. If you were born in 1959, you are eligible to receive 100% of your retirement benefit when you are age 66 and 10 months. If you claim earlier than that age, you will receive a reduced benefit. If you claim after that age, you will receive an increased benefit.
Year of Birth Full Retirement Age (FRA)
1943-1954 66
1955 66 and 2 months
1956 66 and 4 months
1957 66 and 6 months
1958 66 and 8 months
1959 66 and 10 months
1960 and later 67
Now let’s look at how big an impact that can have on your retirement income.
John was born in 1961. His Full Retirement age is 67 years old. This chart shows how his monthly benefit can be affected.
Claiming Age Adjustment
62 70%
63 75%
64 80%
65 87%
66 93%
67 100%
68 108%
69 116%
70 124%
Let me share an example to put this in real $$$, If John’s Full Retirement Age benefit is $2500 per month, he would lose $750 per month if he claimed at age 62. However, if he waited until 70, his benefit would be $3100 per month or a gain of $600. Over his retirement lifetime, that difference could mean hundreds of thousands of dollars.
Does this mean that everyone should wait until they’re 70 to claim benefits? No. Your decision may not only affect your income, but other family members as well.
Five Factors Affecting Your Decision
Here are five factors that could affect your decision.
- Do you need the money? Many retirees don’t have many assets other than Social Security. If so, you may want to start benefits earlier.
- Are you married? Your spouse can receive a benefit based on your record if you pass away. If you take the benefit early, your spouse’s survivor benefit may be reduced as well.
- Are your earnings greater than your spouse? Sometimes it makes sense for the lower earning spouse to take benefits early and let the higher wage earner delay their benefit to get a greater amount.
- Do you plan on working after claiming the benefit? There are earnings limits if you take your Social Security benefit before Full Retirement age.
- Are you healthy? If you have health issues, you may want to take your benefit sooner rather than later.
Of course, the last point is the most important wild card that you will encounter. The biggest concern that some of my clients have expressed is that if they pass away too soon, they didn’t get all the benefit that they earned. It’s sort of FOMO for retirees.
Well, as retirement expert Dr. Wade Pfau explains
“It’s a bummer to die early. But regret about Social Security claiming does not exist after death.”
“The real concern and focus that we can better control is to avoid the situation where we outlive our assets.”
Social Security benefits are designed to supplement your retirement income. Maximizing this valuable benefit requires analysis that is specific to your unique situation. I have several tools that can help you choose the appropriate strategy to help you avoid the situation where you outlive your assets. So, please give me a call and Let’s Make a Plan!
Advisory services offered through Capital Analysts or Lincoln Investment, Registered Investment Advisers. Securities offered through Lincoln Investment, Broker Dealer, Member FINRA/SIPC.www.lincolninvestment.com West Coast Financial Group, Inc. and the above firms are independent and non-affiliated. Social Security claiming advice is not offered through, nor supervised by Lincoln Investment or Capital Analysts. This material is being provided for general information and educational purposes only and should not be construed as investment, tax, accounting, or legal advice, or used as the primary or final determinant of the best strategy on how and when to claim Social Security benefits. It is strongly recommended that each individual meet with a Social Security representative who can address his/her specific situation. A wealth of information, including interactive calculators, can be found at the Social Security Administration’s website: http://www.ssa.gov/pgm/retirement.htm.