When Should I Apply for Social Security to Maximize My Retirement Income?Submitted by Reby Advisors | Certified Financial Planners | Danbury, CT on March 1st, 2019
Presented by Doug Kuring, March 1, 2019
In this video, Doug Kuring, a Financial Planner at Reby Advisors, clarifies the financial impact of when and how you claim Social Security, particularly for a married couple. (To view the full 45-minute presentation on generating sustainable retirement income, click here.)
For most people, Social Security is a key component of retirement income. It's critical to get the most out of your benefits and avoid leaving money on the table.
To learn more about innovative Social Security strategies designed to maximize retirement income, sign up for our upcoming educational seminar on the topic at www.rebyadvisors.com/ss2019.
You may also request a complimentary Social Security Strategy Session with a financial planner by calling (203) 790-4949.
True or false, you will receive your maximum social security benefit if you wait until your full retirement age, true or false.
I thought it was true.
Yeah. I'd say true.
I think it's false.
It's false. So two things I want you to take away about social security. After 12 months of receiving social security benefits, the choice that you made is permanent. There's no take backs. When you choose within that 12 months that you want to redo, you have to pay back everything that you've received since the day that you took it. Bottom line is that your choice gets permanent quick, so it's very important to know that the claiming strategy that you're going forward with is the right one for you. Number two, it's really important to coordinate your social security claiming strategy with all the other stuff you have going on and the assets that you own.
In the event that you can delay social security, it pays to do that and I'll explain to you why. A quick example up here. If you were born in the year 1960 or later, your full retirement age deemed by the social security administration is age 67, well, what does that actually mean? You will get social security statements that have an amount on it. It says at your full retirement age, you will receive X amount of dollars per month. That would be your full retirement age. Born 1960 or later, your full retirement age is 67. In this example, we have somebody who's going to be receiving $2,800 a month at their full retirement age, which is equal to $33,600 a year.
Now, we've got kind of the full spectrum here of times in which you can claim social security, ages in which you're eligible to start claiming. The earliest age is age 62 and this applies to everyone. The earliest age you can claim social security is age 62. Well, why wouldn't I claim earlier, when I can get it ... start getting money earlier? The reason why is because if you choose to claim at your earliest age possible, you'll be giving up 30% of your social security check permanently, which if you just look at the difference here, it's about $10,000 a year. It's significant in retirement. That's age 62, that's the earliest you can claim.
Well, what happens if we go beyond your full retirement age? Each year that you choose to delay and age 70 is the latest, the age that you can claim, you can't go beyond age 70. Each year that you choose to delay, the social security administration guarantees you an 8% increase in that monthly benefit. When we go to 67 to 68, plus 8%, guaranteed for the rest of your life, 68 to 69 plus 16% so another 8%, 69 to 70, plus 24%. That's where you get to ... this number here and again, it's about a $10,000 difference in this example, permanently for the rest of your life so it pays to delay if you can. If we look at just the delta between the latest you can delay, and the earliest you can claim, if you claim at age 62, you'll be giving up 77% of what you could have made at age 70. That's a big difference.
Now, there's a lot of things ... social security is like a maze, to be perfectly honest with you. There's so many rules that the IRS has thrown in there. Quite frankly, it's really ... it's a lot. There's a lot of strategies that we implement for let's say spouse or couples. One of them is, whoever is the higher earner, one of the strategies that we implement is we always try to have that higher earner delay until age 70 and collect their maximum benefit possible. Why do we do that? In the event that the higher earner pre-deceases the lower earner later on in retirement, let's say age 75 now, that person passes away.
The lower earning spouse steps into that higher earning spouse's social security benefit, right? Wonderful thing when now, you're a single spouse and ... I mean, tragic, right? You lost your spouse but at least you can step into that higher social security benefit.
Are they still collecting both?
No, they give up their lower one for the higher one. There's strategies for widows, if you're still working and you choose to claim social security, they take away a portion of your benefits because you're making a paycheck still and collecting social security. There's a lot of moving parts with social security. Bottom line, it pays to delay, if you can and two, make sure that if you can delay, do it.