Social Security- A Few Questions to Ask

Updated: Nov 15, 2019

“The question isn’t at what age I want to retire, it’s at what income.”- George Forman

For many of you, Social Security is a very important part of the income that you will receive

during retirement, and the process of collecting benefits sounds relatively easy. Hit your

retirement age, file for benefits, and start receiving income. Unfortunately, it is not as simple as it looks and one of the most important retirement questions that you must answer is: when is the best time to file in order to maximize your benefits?


There are many different factors that go into this decision, and the answer is not as black and

white as you would think. Your goal is to choose the timeframe that will give you the most

expected income over your lifetime. For this post, I am going to keep my comments relatively general.


Here are a few questions to ask yourself:


Do I know my full retirement age?

This is the age at which you receive the full amount of your social security

benefit. Your full retirement age is determined by your birth year, and it's the

age at which the Social Security Administration deems you eligible to receive

100% of your monthly benefit.


What is my Breakeven Age?

This is probably the hardest question to answer because there's no concrete

answer that applies to everyone. Your claiming decision will be based on your

financial situation, and whether you have a spouse and/or child to care for. A

simple breakeven age calculation can help you determine when you sould claim

your Social Security benefits, and your breakeven age is the age at which your

total lifetime benefit would be the same, regardless of which age you began

taking benefits. You can use the Social Security Administration’s calculator to

help determine your benefit amount. For most people, the breakeven age is

somewhere between 77 and 83.



How is your health and your family history of longevity?

Interestingly, when I ask this question in meetings, many clients (especially men),

are very pessimistic about their future health and longevity. I often hear, “I

definitely won’t live that long!” Statistics often will prove the naysayers wrong.

Your health and how long you live can play a huge role in determining when to

take your benefits. Obviously, the longer you live, the greater the chance you have

to breakeven on receiving your benefits if you decide to wait. If you have health

issues or a family history of poor health, it might make more sense to take your

benefits early.


Who was the higher earner, who is older, and are you married or single?

Social security alone is confusing for people. Now add in spousal benefits, and it

gets even more complicated. I have seen couples who made the decision

individually and have cost themselves thousands of dollars in additional benefits

by not understanding how spouses can receive Social Security.


Spousal income benefits, as well as age discrepancies, can often lead to greater

benefits than receiving your own benefits. If you are divorced and were married ten years or more, you can often qualify for your ex’s benefits if certain criteria are met.


Do you need the income now?

The answer seems obvious, but you would be surprised at how often emotion

plays a role in this decision. There are always media reports that Social Security

will go bankrupt, and often clients want to claim benefits because they are afraid

that social security won’t be around forever. I don’t think that you should worry,

but with future generations, that might not be the case. There are some

projections that benefits could likely be cut by 2035* if legislation is not

introduced to increase revenue.


If you do not need the income immediately, it can pay to wait! Every year that

you defer your benefits, your payout will have grown by approximately 8% per

year until you reach full retirement age. This 8% annual accrual begins once you

turn 62, and it ends once you turn 70. If you have other tax-efficient sources of

income, take those first and wait to claim.

I hope these questions provide a starting point for those of you making this very important

decision. If this is something you don’t want to tackle alone, work with a professional who

can help give you clarity and direction.


Arthur Strauss, CFP®

Financial Advisor


*Social Security Office, Vol.70, No.3, 2010


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