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Social Security: When and How Much?

George Owens

It’s more likely than not that you shouldn’t rely on Social Security alone to fund your retirement-but you shouldn’t completely ignore it either. Two important considerations when it comes to this decades-old program are “when” and “how much.” Let’s look at both.

Timing matters

Many people choose to start receiving their monthly Social Security benefits as soon as they’re eligible, at age 62. Even though this is an appropriate strategy in some situations, postponing distributions by even a few years might increase the total income you’11 receive throughout your retirement.

Essentially, you have three options regarding when to take Social Security benefits. First, you may receive smaller monthly payments by taking benefits as soon as you’re eligible at age 62. Second, you could receive “full” payments by starting benefits at your “normal” retirement age. And, third, you might choose to receive larger payments by delaying your benefits beyond your normal retirement age to age 70.

Just because you can receive larger monthly payments by waiting doesn’t  necessarily mean that putting off receiving benefits is the best move. In some instances, there may be sound reasons to receive payments sooner rather than later.

For example, if you’re in poor health or have a family history of medical problems, it may be prudent to start collecting Social Security as soon as you’re eligible. On the other hand, if you’re in good health and you’ve accumulated enough monetary resources to sustain you during the early years of your retirement, delaying your distributions and collecting larger monthly payments down the road may make more sense.

Marriage issues

The decision about when to take Social Security benefits is relatively straightforward if you’re single-take benefits soon and get smaller payments, or delay and get larger payments. But for married taxpayers, the decision can get considerably more complicated because, in some situations, one spouse’s decision can affect the maximum amount of Social Security benefit the other can receive.

In fact, there are many factors to consider with a spousal benefit. For instance, married taxpayers should discuss who will start taking Social Security payments first or whether both spouses will begin taking them concurrently. How will this affect their planned retirement dates? If you’re married, it’s critical to research all of the alternatives available to you and your spouse so you can take full advantage of available opportunities.

Information available

In making a decision as to when to start taking benefits, it’s also helpful to look at your estimated benefits. By visiting https://ssa.gov/myaccount and creating an online account, you can receive information detailing your expected annual benefits from the Social Security Administration (SSA).

This information is calculated based on your career earnings to that point, so if your income continues to go up, so will your estimated benefits, up to a certain point. For more information, the SSA’s website offers a useful calculator at https://ssa.gov/estimator that allows you to estimate your future Social Security benefits. On this page, you can enter different levels of future income and retirement ages to compare how much you’ll receive under a variety of scenarios.

If you’re close to retirement and you’d like to receive a larger benefit, consider postponing retirement and working a few extra years. Doing so can help maximize your Social Security benefits, as well as help you build up more funds in an IRA or employer­ sponsored retirement plan, such as a 40l(k). The more financial resources you have, the more flexible you can be about when to take your Social Security benefits.

No “gimme”

Social Security may seem like a “gimme” that will be there, no matter what, to give your retirement portfolio a modest boost. Yet, by thinking about it this way, you might wind up receiving less overall. Work with DMLO to fully integrate your plans for Social Security into your overall portfolio.

For more information on the topic, contact George.

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