Is There An Optimal Age for Turning on Your Social Security Benefits?
Is there a foolproof way to calculate it?
There is no "one best age" for everyone. It's a personal decision. Let's say that you decide to delay taking your benefit until age 70, but you are thrown from a ride at Disney World and killed at age 69. You will have then forfeited 7 years worth of available benefits. On the other hand, suppose you turn on your benefit at age 62 and then live to be 90 years old, you will end up receiving many thousands of dollars less over your lifetime. Since you probably don't know how long you're going to live, how in the world do you decide?
Retirement May Be Longer Than You Think!
Surveys have shown that the number one concern of retirees is outliving their income. With Social Security that's not really a concern, but the amount you collect from Uncle Sam can drastically affect the amount you'll drawdown from other sources, such as a 401-k or IRA. When it comes to retirement you should always plan for the long-term. Here are some helpful tidbits of Social Security information that can help with your decision:
- The benefit varies greatly from age 62 to age 70. Full retirement age today, for most folks, is around the age of 66. You can, however, elect to start receiving benefits as early as age 62. By doing that you will get 25% less than at full retirement age. The percentage decreases every year until full retirement age. But get this: it increases by 8% for every year you delay after that, until you reach 70! That's like an 8% annuity with no market risk! One good strategy is to supplement your retirement income with other sources such as penions, IRA's etc. and live off of those until you reach 70, then turn on your social security and scale back on the other sources. ( A good planner can help with this! ) There's no advantage to delaying longer than age 70.
- The benefit that others in your family receive can be a factor. Your spouse may be eligible for a benefit based on your work record. Your children too, may be eligible for a benefit if they are disabled, or another parent has died. There are also some little-known tricks to enhance your payment amounts, such as file-and-suspend. Again, a good planner can assist you here.
- You may be able to keep working. The rules allow you to work as much as you want to after full retirement age, with restrictions on how much you can make before that. If you don't mind working it's a great way to delay taking your benefit.
- Medicare can be a factor. After retirement, many folks discover that Medicare relieves them of a huge monthly expense for healthcare. These things can be known and calculated in advance, and help in your decision.
- Family history can be a huge predictor. If your Mother and Father and six siblings all fell over dead from natural causes at age 63, things aren't looking so good for you either. On the other hand, if your Dad fought in the Spanish-American War, where he met your Mom, and they're both still alive, you might want to consider delaying your benefits if at all possible.
Life Gets in The Way Sometimes
It may be that your decision isn't so hard. You were laid off from your job at age 59, have spent all of your savings and are turning 62. You have no choice but to turn on your benefits. But for many, the choice is more nebulous. If that's your situation, let us help you with it. We can provide a detailed report outlining your social security choices, pro and con. Don't make an uninformed guess that may cost you thousands of dollars in income. Give us a call today.
Until next time,
Are you a serious investor? Like to keep up with what's happening on Wall Street. Take a look at our commentary on what's happening in the market. Delivered weekly to your in-box!