Making the Most of Your Social Security Benefits: Five Key Things to Consider

“When should I start taking my Social Security retirement benefits?” Wouldn’t it be simple if there was a one-size-fits-all answer to that question! But, everyone’s answer is different, because no two situations are the same. 

The most important thing you can do is to inform yourself on your options and then base your decision about when to apply for benefits on your individual and family circumstances. There are several things to consider as you think about when to start getting your benefit. Here are just a few questions you will need to answer for yourself: 

  • What are your current and future financial needs and obligations? 
  • What is your health status? What is your family health history and longevity? 
  • What is your marital status? 

The Social Security Administration put together a list of five things to consider as you weigh all the facts before making this crucial decision:  

Your monthly retirement benefit will be higher if you delay starting it.

Your full retirement age varies based on the year you were bornYour basic Social Security benefit — the amount you would receive at your full retirement age — is based on your lifetime earnings. However, the actual amount you receive each month depends on when you start receiving benefits. You can start your retirement benefit at any point from age 62 up until age 70 and your benefit will be higher the longer you delay starting it. This adjustment is usually permanent: it sets the base for the benefits you’ll get for the rest of your life. You’ll get annual cost-of-living adjustments and, depending on your work history, may receive higher benefits if you continue to work.  

Here’s an example: let’s say you turn 62 this year, your full retirement age is 66 and 6 months, and your monthly benefit starting at full retirement age is $1,000. If you start getting benefits at age 62, your monthly benefit will be reduced 27.5 percent to $725 to account for the longer time you receive benefits. This decrease is usually permanent. If you choose to delay getting benefits until age 70, you would increase your monthly benefit to $1,280. This increase is the result of delayed retirement credits you earn for your decision to postpone receiving benefits past your full retirement age. The benefit at age 70 in this example is about 76 percent more than the benefit you would receive each month if you start getting benefits at age 62 — a difference of $555 each month.  

Retirement may be longer than you think.  

When thinking about retirement, be sure to plan for the long term. Many of us will live much longer than the “average” retiree, and most women live longer than men. About one out of every three 65-year-olds today will live until at least age 90, and one out of seven will live until at least age 95. Social Security benefits, which last as long as you live, provide valuable protection against outliving savings and other sources of retirement income. Again, you’ll want to choose a retirement age based on your circumstances so you’ll have enough Social Security income to complement your other sources of retirement income.  

Married couples have two lives to plan for.  

Your spouse may be eligible for a benefit based on your work record, and it’s important to consider Social Security protection for widowed spouses. After all, married couples at age 65 today would typically have at least a 50-50 chance that one member of the couple will live beyond age 90. If you are the higher earner, and you delay starting your retirement benefit, it will result in higher monthly benefits for the rest of your life and higher survivor protection for your spouse, if you die first. When you are receiving retirement benefits, your children can also be eligible for a benefit on your work record if they’re under age 18 or if they have a disability that began before age 22.  

You can keep working.  

When you reach your full retirement age, you can work and earn as much as you want and still get your full Social Security benefit payment. If you’re younger than full retirement age and if your earnings exceed certain dollar amounts, some of your benefit payments during the year will be withheld. This doesn’t mean you must try to limit your earnings. If Social Security withholds some of your benefits because you continue to work, you will be paid a higher monthly benefit when you reach your full retirement age. So, if you work and earn more than the exempt amount, it won’t, on average, decrease the total value of your lifetime benefits from Social Security — and can increase them.  

Don’t forget Medicare.  

If you plan to delay receiving benefits because you’re working, you’ll still need to sign up for Medicare three months before reaching age 65. If you don’t enroll in Medicare medical insurance or prescription drug coverage when you’re first eligible, it can be delayed, and you may have to pay a late enrollment penalty for as long as you have coverage.  

When to take your Social Security benefit is a decision that shouldn’t be taken lightly. BerganKDV has a team of wealth advisors who can help you navigate how your Social Security benefits fit in an overall retirement strategy. Want to learn more about what we can do for you? Start here. 

The views and strategies described may not be suitable for all investors. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for accounting, legal or tax advice. References to future returns are not promises or even estimates of actual returns a client portfolio may achieve. Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation. 

The views expressed are those of BerganKDV Wealth Management. They are subject to change at any time. These views do not necessarily reflect the opinions of any other firm. Investment advisory services and fee-based planning offered through BerganKDV Wealth Management, an SEC Registered Investment Advisor. 

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