One important source for retirement income for many people is Social Security. You can take steps now to protect your benefits and determine the best plan to begin your benefits in retirement. As described in the book, “Get What’s Yours” by Laurence J. Kotlikoff, here are a few key actions to take in planning for your benefits:
1) Make sure your Social Security (SS) record reports all benefits that you are eligible. Confirm that Social Security has accurately recorded your historical earnings. Pull your earnings statement online to make sure your history is correct. SS may not be crediting you for all your covered earnings either due to a clerical error by your employer or by Social Security. SS computes your expected benefits over a 35 year history. It is vital that you review your highest earning years, say the past 10 to 15 years, for accuracy. Having available your W-2’s from these years will allow you to contact SS to correct your history if necessary.
2) Consider the best timing to collect your benefits. Go to SS online and compute your potential lifetime benefits without inflation based on your benefits estimate on your account. Here is an example. We computed benefits starting on Full Retirement Age (FRA), then computed benefits by waiting to collect until age 70. We used benefits at FRA are age 66 to be $2000 and benefits at age 70 to be $2600, then determined the difference of the scenarios with the lifetime benefits received with expectancy to the ripe old age of 90 and with no inflation adjustments:
The Lifetime benefits of FRA were $2000 x 288= $576,000.
The Lifetime benefits of waiting to age 70 were $2600 x 240= $624000.
The difference is $48000 in the two plans. Is it worth waiting? What is your life expectancy? The breakeven age between FRA and waiting to 70 years is 88 ½ years old in this example. Review your comparative benefits of taking SS at FRA or waiting until age 70. You may be surprised with the results.
3) If you are eligible for spousal benefits, consider your FRA in comparison to your spouse. Review a scenario of taking both spousal and your retirement benefits as compared to taking just your spousal benefits due to death. You may find that you will receive more benefits at age 70 than taking both benefits at your FRA time. I have a client who had less than her husband’s benefit, yet they were more than half of her husband’s full retirement. She decided to take the spousal benefits upon his death and hold on her benefits until she reaches age 70 due to the benefits she will receive from age 70 to her life expectancy. She expects her life expectancy to be age 90.
As noted in the previous discussion, you can take steps to protect your benefits that are rightfully yours. The Social Security Administration, SSA, can answer questions, and it behooves you to understand the system independently of the advisors of SSA. The advisors are not always fully informed or trained to best answer your questions or your circumstances. As the saying goes, buyer (SSA benefits recipient) beware.
We welcome your questions or comments regarding this important retirement topic. Please contact our office for any questions or concerns that you wish to discuss.
An Important Message
While every effort has been made to provide valuable, useful information in this publication, this firm and any related suppliers or associated companies accept no responsibility or any form of liability from reliance upon or use of its contents. Any suggestions should be considered carefully within your own particular circumstances, as they are intended as general information only.