When to start Social Security

This is a question many people are struggling with today.   And in terms of making the key decision, surveys show many Americans today don’t understand their alternatives.  We are finding the smartest path to take depends on many factors.  One of the key factors is marital status.  Another key factor is one’s age.  But when it comes to a retiree making their Social Security decision, several issues make the decision complicated.  For instance, quoting T. Rowe Price research, “Retirees have two competing goals: maximizing Social Security benefits, which means delaying benefits to age 70, and minimizing savings withdrawals in the early years of retirement, which means taking benefits as early as possible.”

In short, we strongly suggest retirees get professional help before they make their choice.  More specifically–a married couple should seek professional help before the spouse, who has been the “lower wage earner”, starts their Social Security benefits.

Life expectancy and retirement

There are a lot of factors to consider when it comes to retirement planning.  If you’ve ever plugged in assumptions on a retirement calculator to try to determine “your number” then you know what I’m talking about.  One thing you want to avoid underestimating is your average life expectancy.  This is a key number telling you how many years your retirement income will need to last.  You will need to take into consideration factors such as your family medical history, your current health, etc.  While people are generally living longer, your family history plays a primary role in how you should view your life expectancy.  Remember, if you live into your 90’s you may need to plan for a lower investment withdrawal rate over your golden years.

Are you maximizing your income?

In May we blogged about your retirement income stream, specifically the potential benefits of delaying your Social Security if you are able to do so.  Did you also know that your Social Security is permanently reduced if you claim your benefits early?  Remember, it is important to maximize any source of income during retirement.  This includes Social Security, as well as other potential income streams like pensions and annuities.

For those who are willing to wait, or who can work a little longer, there are additional strategies you can consider in order to “maximize” the benefits you receive from Social Security.  To help determine this, there are three key factors to consider:  1) how long you are planning to work, 2) your marital status and age differences, and 3) your health and family medical history.  By sorting through these key points and working with a professional, you should be able to determine if strategies such as “file & suspend”, “switch strategies”, or “filing a restricted application” can benefit you by increasing the amount you receive over your lifetime.  The benefits can be significant.