Social Security Planning
Choosing the right Social Security election strategy is one of the many important decisions that you will make for your retirement. We are experts in Social Security Retirement benefits and can help get the most in benefits by informing you when to file, what to file and how to file.
Many people see the issue of filing for Social Security benefits as a simple matter of filing at age 62, 66 or 70. Unfortunately those that only strive to answer the question of, “when should I file for Social Security?” miss the larger picture. A proper Social Security filing strategy is not about just when you file but rather a delicate combination of filing at the right age and filing for the right benefit.
In general, how much you will receive in lifetime Social Security benefits depends on:
- your earnings history
- how & when you elect benefits
- how long you live
You can’t control how long you live and you can’t go back and change your earnings history so there is only one thing that you really control and that is how and when you elect benefits. A properly drafted Social Security strategy that is personalized for your situation should tell you exactly when to file and what benefit to file for. So how do you find out what your strategy should be? Can’t you just go down to your closest Social Security office and ask them? Maybe, but would you consider piling all of your tax information in a box and dropping it off at the closest IRS office with a note that said, “call me and let me know what I owe?” No, you have a return prepared before you file your taxes. In the same manner you should have a personalized Social Security filing plan before you file for your benefits.
The first step in creating your personalized Social Security filing plan is understanding how your benefits are increased and decreased based on your filing age. For workers born between 1943 and 1954 the Full Retirement Age is 66. At age 66 you can get the full Primary Insurance Amount (PIA).If you file for benefits prior to that age you will take a reduced payment amount. If you file later than age 66 your benefit amount will grow by 8% for every year you wait up until age 70.
Traditional calculations would use the data above and create a “break even” analysis. This analysis would show you the age at which you would catch up to the other election ages in the total amount of benefits paid. If you think you would live longer than the “break-even” age, you should elect at a later time.
The BIG problem with using this strategy is that it does not consider the two benefits that individuals who are currently married or have been married have available to them; Spousal Benefits and Survivor Benefits. These benefits are some of the most generous benefits that Social Security provides. Especially if you know how to use the advanced switching techniques to collect a benefit and earn delayed credits (which will increase your benefit amount by 32%) for waiting. Can you have you cake and eat it too?
Maybe; want an example? Once you reach full retirement age, some people can use a restricted application to claim a spousal benefit only, while letting your own benefit continue to grow. You would then switch to your own higher benefit amount when you reach aged 70. At that point your own benefit should be 32% higher due to the delayed retirement credits.
While this is a very simplified view of one of the many advanced options available, you can see that this is a very complicated decision.
One thing is for sure; choosing the right Social Security election strategy could be the most important decision of your retirement. If you make a mistake now it could be devastating; possibly costing you thousands of dollars over your lifetime and impact your loved ones after you are gone.
Before you file, call us to find out about your options.