Long before Clash sings “Should I Stay or Should I Go,” Social Security recipients have asked, “Should I claim or should I wait?”
When punk rock tunes were first released in 1982, the life expectancy in the United States was 75 years. There was no point in waiting to get Social Security. Or so it would seem.
In 2021, Americans’ life expectancy approaches 80 and with those who have already reached age 62 expected to live an average of another 20 years, the decision to claim Social Security may be too high. has become complicated. If you wait until the maximum age (currently 70) before starting collection, you are still expected to live 15 years or more.
You can take comfort in knowing that there are some fairly reliable guidelines that can help you make your decision to claim Social Security. Some are rather unexpected, some are obvious and one can be downright surprising.
#1: You Have a Long Life Expectancy
It goes without saying. While you never know when you will stop or when you will leave, actuarial tables can provide you with a clue (along with your own family history).
“In a Social Security plan, life expectancy is an important factor,” says Lyle Solomon, principal attorney at Oak View Law Group in Rocklin, Calif. “Of course, no one can determine how long they might live, but according to the most recent data from the Centers for Disease Control and Prevention, the average American who is 65 can expect to live for the next 19 years. could.”
It is well known that, by introducing Social Security later, the cumulative dollars of that higher benefit will eventually reach and outweigh the smaller benefits earned from claiming Social Security.
“If one doesn’t need the income, and has a high life expectancy, it makes sense to wait until 70 and let their benefits grow,” says Jennifer Stein, director of client engagement at Pribe Wealth in Minneapolis. “Unlike investing in the market, this growth is guaranteed. While everyone’s break-even is different, for many people the break-even to profit at 70 is around the mid-80s. A break-even analysis will give you your best results.” Can provide an accurate breakeven for age, condition and mileage.”
#2: You Don’t Have Enough Savings for Retirement
It may seem counter-intuitive, especially if you’ve read the reasons to start collecting Social Security as soon as possible, but, once you think about it, it makes sense, but only if May you have a long life expectancy.
Cory Bittner, co-founder and chief operating officer of Falcon Wealth Advisors at Mission Woods, says, “If you don’t have money saved and invested for retirement, you may need to pay Social Security benefits to your cash flow later in life.” needs to be maximized.” , Missouri.
The basic idea here is to accept that you will need to tighten the belt for a few years to avoid locking yourself into an unacceptable position for the rest of your life.
“If your earned income or investment income exceeds your lifestyle needs, it makes sense to wait,” says Dr. Guy Baker, founder of Wealth Teams Alliance in Irvine, Calif. “There is no point in reducing profit just to get income.”
#3: Are you still working or have more than enough money left over for retirement
It makes a little more sense, and for several reasons as well. For one thing, if you have found a life partner, then waiting also increases their benefits.
“If you collect Social Security at age 70, there’s no penalty for any income you earn,” says Susan Dover, founder of the Social Security Resource Center in Philadelphia. “Spouse benefits are greater at age 70. If you don’t really need the money at age 62, consider waiting until age 70 and get the maximum benefit. will also be able to give maximum benefit to
Don’t underestimate the size of the increased profit for you. This enhanced base level also helps counter any future inflationary increases in annual payments.
“If you don’t need income from Social Security at age 62, waiting until age 70 could potentially increase your benefits by 132%,” says Chuck Kazaka, founder of Macro Money Concepts in Stuart, Florida. it is said. “In addition, any life-value adjustments will apply even if you don’t start collecting until age 70.”
Also note that if you take out Social Security while earning income from your job, you may be subject to taxes. “If the potential recipient has the potential to earn a significant income during their sixties, then taking Social Security only increases taxes and reduces final benefits,” says Baker.
“If you’re still working, earning more than $18,960 and receiving Social Security, you’ll receive a $1 reduction for every $2 benefit you earn until your full retirement age,” Stein says. Huh. “It’s generally recommended that you wait to claim Social Security.”
#4: Your Spouse Didn’t Work
If your spouse is a dependent on you to receive Social Security, survivor benefits are worth considering. Again, this doesn’t rule out health issues or current income needs, but should account for if you pass both of those tests.
Solomon says, “Spouses who didn’t work for a living or didn’t earn enough credits to qualify for Social Security could start receiving benefits at age 62 if their spouses did. can.” “If you accept your spouse’s benefit before you attain your full retirement age (FRA), it will be reduced, just as you would if the benefit is on your record. Your spouse’s to your spouse’s FRA. Or the maximum spouse benefit you can get for being eligible for wife.”
Even if your spouse has worked, the difference in salary-based eligibility and life expectancy can make survivor benefits a significant factor in your decision.
“If your benefit is more than two in pairs, it’s likely that your benefit will become a survivor benefit,” says Jeremy Keil, a retirement-focused financial planner with Keil Financial Partners in New Berlin, Wisconsin. “If one of you is expected to live past 12 years, you may want to continue to wait as long as possible so that there is as much survivor benefit for the widow(er). For example, a 65-year-old non- Smoking, for the average health couple, is more than 90% of what one of you will achieve in the past 12 years from now.
#5: You love 8% guaranteed investment return
Here’s something that may surprise you: Social Security isn’t just a benefit, it’s an investment. Specifically, it is like a savings bond that matures at the age of 70. Sure, you can claim the benefit earlier, but the longer you wait, the more value that bond will be worth to you.
This results in a very significant annual return that far exceeds that of a typical bond and approaches that of a stock. Also this return is guaranteed.
“If you don’t need the income and/or are still working, there won’t be any point in claiming Social Security at least at age (currently 62),” Czajka says. “If you don’t need the income, it would make more sense to postpone collecting Social Security until age 70. Doing so will make your benefits higher, as there is an 8% benefit rollup for each year that you benefit.” Do postpone, up to age 70.”
Another way to look at it is in terms of the permanent damage you are causing yourself by claiming too early.
Says Solomon, “If you claim Social Security before you reach FRA, your payment will drop by 25% to 30%, compared to what you would have received if you had waited, 25% of your payment. will be reduced.” “This shortage will go on indefinitely. Instead, if you wait until after your FRA to start receiving benefits, Social Security will give you an 8% delayed retirement credit for your last monthly payment for each year you wait, until age 70.
Your Social Security claiming strategy should be a well-thought-out decision that includes all of your other financial matters. It should not be made separately. Likewise, it will affect other financial decisions you may be taking.
“A comprehensive financial plan that includes taxes, estate planning, and personal goals must be factored into Social Security claims decisions,” says John Hagenson, founder and managing director of Keystone Wealth Partners in Chandler, Arizona.
Because of its lifetime importance, you should also examine the reasons why it makes sense for you to take Social Security at the earliest possible age before making your decision.