Grab it while you can, or hold out for better benefits (if the program’s still solvent)?
- The age-old question about when to file for Social Security comes down to both financial and nonfinancial issues.
- Historically, the longer you could wait, the greater your benefits. But now questions about the program’s solvency and “means testing” are complicating the equation.
- Ask your advisor to help you go through your projected balance sheet, cash flow and tax situation to see when Social Security should ideally be part of your income stream.
Retirement is one of life’s biggest transitions, and the first question many people ask is, “When should I start to take my Social Security benefits?” Do you need the cash flow right away, or can you afford to wait to start collecting? If you’re not sure, go through a projection of your balance sheet, your cash flow and taxes to see if Social Security really needs to be part of your income as early as age 62. Or, can you defer it to a later date.
Deferring to a later date has always been the conventional wisdom, but now retirees have to worry about the long-term solvency of the Social Security program as well as “means testing.” If you make a lot of money, there’s a chance that your Social Security benefits could be reduced in the future to help shore up the program’s funding shortfall.
This AARP article can help you determine whether “means testing” applies to you and your spouse. You can also go to SSA.gov and quickly obtain your projected benefits at age 62, your benefits at normal retirement age (66 to 67 for most folks), your benefits at age 70, and finally your lifetime earnings history. Make sure to correct any errors you find there.
When should I really take Social Security?
There are three different ways of approaching this question:
1. “I need the cash flow now.” In this case, go to the Social Security Administration and file for it. I’m told they’re pretty helpful.
2. You can do a “restricted application.”
3. You can do a “file and suspend.”
The last two options are too detailed to go into here, but we want you to recognize that there are multiple ways of slicing and dicing Social Security benefits.
Generally speaking, if you’re married, you’ll receive the full benefits of the higher-earning spouse in your household and up to half the benefits of the lower-earning spouse. And that amount can be higher if the lower-earning spouse actually has a higher lifetime earnings record. These websites can help you calculate your benefits: Social Security Timing, SS Analyzer and Maximize My Social Security. Your accountant, attorney or financial advisor should be able to walk through the process. Or call us anytime if you need assistance. There are some great benefits associated with Social Security, but you need to file correctly in order to receive them.
Speaking of benefits, don’t forget our Just Shred It! event on Saturday, April 26, at the Coyle Financial parking lot (9am to noon). Gather old documents and files and we’ll shred them right in front of you. Clear up your house a little bit, do some spring cleaning and maybe make life a little simpler. Until next time, enjoy.
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