Is retirement approaching soon? If so, you likely have a number of big decisions ahead of you. You may be thinking about how best to allocate your investments, how you will cover health care costs and possibly even what you will do with all your newfound free time.
One of your biggest decisions may be when to start taking Social Security benefits. You’ve likely paid into the system for decades, so you might be ready to start taking advantage of your distributions. In fact, many retirees file for Social Security as soon as they’re eligible.
That’s not always a wise decision, though. While it may be nice to get the guaranteed income, there are also reasons it makes sense to wait. It’s not an easy decision, and there’s no right or wrong answer that applies to everyone. It depends on your unique needs and goals.
It’s important to think through the decision. Once you file for benefits and begin receiving payments, you can’t make a change. Your decision is permanent, and it will impact the amount of your benefit for the rest of your life. Below are a few factors to consider as you decide when to file for your Social Security benefits:
Do you need the money?
This may be the most basic but important question to answer before you file for Social Security. Ask yourself whether you really need the income at this time. You may want the income, but do you need it?
If you need the money to support yourself and have no other option to generate income, then it may be wise to consider filing for benefits. That’s especially true if you think you’ll find yourself in debt or other challenging circumstances without Social Security income.
If you don’t truly need the money at this time, however, it may be best to wait. Social Security offers an 8 percent credit to your benefit for each year past your full retirement age that you wait to file. The maximum age at which you can file is 70. If your full retirement age is 66 and you delay to age 70, your benefit would increase 32 percent, or 8 percent for each of the four years.1
If you can generate income from savings or even part-time work, it may be best to wait. Also, look at your budget and consider ways to trim your expenses so you can delay benefits.
Do you have a spousal benefit?
Did your spouse earn significantly more than you during your marriage? If so, you may be eligible for what’s called a spousal benefit, which is a Social Security benefit based on your spouse’s income rather than your own. The spousal benefit is offered if it is greater than your individual benefit.
This affects the timing of your filing, because you and your spouse can strategize together on when to file. For instance, you could file for your full benefit as soon as possible while your spouse delays. Then, when he or she files, you could switch to the spousal benefit.
That’s just one example of how married couples can schedule their filings to maximize their benefits. There may be other strategies that work better for you. Analyze your needs and goals, and possibly discuss them with your financial professional, to develop a strategy that works for you.
How is your health?
Finally, you may also want to consider your health and even your family’s longevity history. You clearly get a greater annual benefit if you delay filing. However, if you have reason to believe you may not live long into your 70s, it may be better to file early. After all, there’s not much of an advantage to waiting for a larger benefit if you’ll be receiving it for only a few years.
Be careful using family history as your guide, though. It’s quite possible that you could have a long life span even if your parents or siblings died relatively early in retirement.
Ready to plan your Social Security strategy? Let’s talk about it. Contact us at Sprouse Financial Group for more information. We can help you analyze your needs and develop a strategy. Let’s connect soon.
This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice.
The material is not intended to be legal or tax advice. The insurance agent can provide information, but not advice related to social security benefits. Clients should seek guidance from the Social Security Administration regarding their particular situation. The insurance agent may be able to identify potential retirement income gaps and may introduce insurance products, such as an annuity, as a potential solution. Social Security benefit payout rates can and will change at the sole discretion of the Social Security Administration. For more information, please consult a local Social Security Administration office, or visit www.ssa.gov
16440 - 2017/2/15