Americans leave $10 billion in Social Security benefits on the table. A Wise Claiming Strategy Can Provide Additional Retirement Income.
SOCIAL SECURITY PLANNING
About Social Security
Social Security retirement benefits help provide lifetime, inflation-adjusted income. Combined with your retirement savings, plus any pension benefits you may receive, Social Security may serve as an important component of your overall plan for retirement income.
When Can You Claim Social Security?
Eligibility for Social Security begins "early", at age 62. However, claiming early will reduce your monthly check -permanently. There are many issues to consider when deciding to claim benefits.
Two Key Terms: PIA and FRA
Your Primary Insurance Amount, or PIA, is the amount of monthly income you will receive at your normal retirement age, also known as your Full Retirement Age (FRA). Depending upon when you were born, your FRA will range from age 65 to age 67. People born between 1943 and 1954 have an FRA of 66. Click here to see your FRA.
Your PIA, which is based upon your lifetime earnings, may be reduced or increased, depending upon when you decide to claim retirement benefits. You may claim benefits before reaching your FRA, as early as age 62, and you may delay claiming until after your FRA, as late as age 70.
Claiming after you've reached your FRA offers benefits. Your monthly check will be increased by 8% for each year that you delay, up to age 70. For example, if your FRA is 66, and you delay four years until you're 70, your monthly check will be 32% higher than at age 66, and 75% higher than at age 62. Over time, one might receive significantly more dollars depending upon when benefits are claimed.
Great benefit can come from seeking the advice of a financial advisor that specializes in retirement income planning, one who can help incorporate your social security claiming options into an overall retirement income plan.
How Long Will You Live In Retirement?
Have you ever thought about how many years you might spend in retirement? While we can't know for certain, we should think about how life expectancy has increased in the decades since Social Security began.
In 1935, life expectancy in the U.S. was 61.7 years.
By 2010 it had increased to 78.7 years.*
Consider a married couple age 65. There's a 50% chance that one spouse will live to age 92. And a one-in four chance that one spouse will live to age 97.**
As of December 2010 ***, 5.8 million Social Security beneficiaries were at least age 85. Some much older.
Source: * National Center for Health Statistics, National Vital Statistics Reports
Source: ** Annuity 20000 Mortality Table, Society of Actuaries
Source: *** Social Security Administration Facts and Figures about Social Security, 2011
How Delaying Social Security May Boost Your Total Income
Let's assume that your age 66 projected monthly retirement benefit is $2,400. Claiming benefits at age 62 reduces the monthly check from $2,400, to $1,800.
That's a reduction of $7,200 per year. Again, that reduction is not for a year, or a few years. It's PERMANENT.
Over the 38 years from age 62 until age 100, this means giving up $273,000!
Now, you may feel that living to age 100 is unrealistic. If so, then back that up by 20 years. If you were to live to age 80, the loss in retirement income is still $29,000.
Don't Automatically Think That Claiming Social Security Benefits Early Is Your Best Decision
It may have been the right choice for your parents, but it could be the wrong choice for you.
In fact, if you feel that you are likely to live to age 80, or, 85, you should think carefully about delaying benefits until even after your full retirement age. This is because for every year that you wait beyond full retirement age, your monthly check will be increased by an additional 8%.
Waiting until age 70 means receiving 32% more retirement income versus age 66, and 75% more income compared to age 62. That's $1,800 per month at age 62, versus $3,168 at age 70.
Although the difference in these two numbers is dramatic, it's only one factor in choosing the Social Security claiming strategy that's best for you.
The opportunity to receive a higher monthly income helps explain why proper retirement income planning is important. It also points out why a well-designed retirement income plan shouldn't overlook how to maximize Social Security benefits.
Your need for income and views about life expectancy are just two of many important factors in determining when to receive benefits.
Common Investor Mistakes
Underestimating the critical role Social Security benefits can play in retirement income planning
Being eager to collect benefits---filing at a younger age with a reduced benefit.
Feeling entitled to their money and how it is invested
Not considering the earning limitations and tax effects on Social Security when planning withdrawals from all income sources
Approaching the decision solely on individual benefits, and not considering your spouse
How We Can Help
Integrate your Social Security benefits election choices within your personal retirement income for life strategy plan
Show you how much more of your Social Security you could receive by delaying your election
By delaying your Social Security, you can provide a 7-8% increase per year after Full Retirement age, and it may be adjusted for inflation
Maximize your income by calculating the tax implications in your retirement income plan
Teach you how to collectively approach your election decision. Calculate the best time for each of you to make your election, and how it impacts the other
Consider these statistics, gathered from a survey of 532 married people age 60-66 conducted by Senior Market Sales and Market Tools:
73% of people are unaware of special election strategies like file and suspend and restricted application. A Boston College study estimated that Americans leave $10 billion in Social Security benefits on the table by not taking advantage of these strategies.
77 percent of people think they can go to the Social Security office for advice, when in fact SSA personnel are not trained or equipped to dispense anything more than monthly benefit amounts at different election ages, and the SSA actually prohibits its representatives from dispensing advice.
At Anthony Capital, we can help you maximize your social security benefits, and properly integrate them within your larger Retirement Income for Life Strategy plan.