Understanding the Important Role Social Security Plays in Your Retirement Security
Many people I speak with tell me they intend to file for their Social Security benefits as soon as they can when they turn 62. For most people, this decision could cost them hundreds of thousands of dollars over the remainder of their lives.
When I let them know, they have many rationalizations as to why they don’t want to wait. “I don’t think I will live that long” or, “I have paid in all these years, and I want to get my money back”. There are many others, but I think you get the picture.
Why Would I Wait?
Because waiting increases your benefit by 8% each year (plus the cost of living adjustment) each year between 62 and 70. Also, if you are still working and claim social security before your full retirement age (between 66 and 67 depending on the year you were born, those born after 1959 are at 67.
Another reason is that if you are working and receiving benefits prior to your full retirement age (FRA) the earnings limit is $18,960. Every $2 above that amount will result in a $1 deduction from the benefit paid. In the year you achieve your FRA, the reduction is $1 for every $3 you earn. Of course, once you reach FRA, you have no limit as to how much you can earn.
For me, waiting to 70 will result in my social security benefit increasing by more than $800 per month, or almost $10,000 per year. In order to provide that much income increase in 4 years, I would have to save at least $144,000 to create that much guaranteed lifetime income during that 4 years!
Does It Ever Make Sense Not To Wait?
If you would be eligible for a survivor benefit and had minor children, this could be a reason to start collecting. If you are injured and eligible for disability benefits, that is another reason to not wait.
It Really Isn’t That Much Money, So What Difference Does It Make?
I and Davi have been following an optimization strategy and it will result in over $1,000,000 in retirement income before we are both statistically likely to be dead. To me, this is a significant amount of retirement income.
If I Wait To Claim, Can I Retire When I Want To?
One of the interesting things I have learned over the years is that you can retire at your intended age, draw money from your savings to equal what social security would provide if filing early, and actually end up with more money in savings later than if you had taken social security earlier!
I have done this calculation many times when putting a retirement income plan together with a client. Getting the numbers right took quite a while. I now have access to a program that can show the outcome of different claiming and spending strategies in real time. This is a very powerful tool that can be very enlightening.
This topic is so important that I will provide, at no cost to you, access to the program so you can discover the best strategies for you. Call the office at 415-331-9030 or go to our website and contact us to set up a zoom meeting so you can see your options in real time. When we review your options, I will provide you with a claiming checklist so that you will be prepared when you go to claim your benefits.
Roger holds the coveted and well-earned designations of Chartered Financial Consultant (ChFC®) and Retirement Income Certified Professional (RIPC®) from the American College. He is also a licensed insurance agent for life and health insurance and a Certified Paralegal for Estate Planning.