Claiming Social Security can feel like a balancing act.
For many, Social Security is a key consideration for retirement.
Even so, the benefits will not allow you to maintain your current standard of living in most instances.
For this reason, you will need to manage your current savings and maximize your Social Security benefit.
According to a recent Daily Journal Online article titled “Are You Ready for Social Security? 3 Questions to Answer Before Claiming Benefits,” people nearing retirement should carefully review how their goals and savings align with claiming Social Security.
What works for one person, may be unwise for another.
What should you consider?
Current Retirement Savings.
With pensions plans being largely a relic of the past, most people will require both personal savings and Social Security to cover their expenses in retirement.
For this reason, how much you have saved will influence when you claim benefits.
If you claim the benefits early, the monthly check will be smaller.
Claiming Social Security at the earliest possible date will reduce your payment up to 30 percent.
Waiting until full retirement age could increase your monthly benefit by up to 32 percent each month.
If you expect to rely more heavily on Social Security in retirement, then delaying would be wise.
However, you will need to meet your financial needs with only your retirement savings until then.
Expected Retirement Date.
Although you can continue to work and also claim Social Security, most people do not do this.
Instead, the time of their retirement often coincides with filing for benefits.
For this reason, you should set a realistic expectation.
A study by the Aegon Center for Longevity and retirement found about 40 percent of retirees left their jobs earlier than they had planned.
For one third, this was a result of health issues.
For a quarter, early retirement was a result of being let go.
For this reason, your retirement plan should not hinge on being able to wait until age 70 to collect Social Security.
You will want to adjust your plan now to either save more to sustain you through age 70 or adjust your expenses to allow you to live on a smaller monthly benefit.
The Plan of Your Spouse.
Are both you and your spouse eligible for Social Security benefits?
Work together to create a strategy for claiming Social Security.
You may both retire at the same time and claim at the same time.
One may retire earlier and claim earlier.
Often couples will decide to have the lower earning spouse claim early and the higher earning spouse wait.
This allows you to have income from Social Security earlier and also have a larger benefit later.
Have your “cake and eat it too”?
Death is never pleasant to consider.
Woody Allen famously quipped that he had no problem with dying … he just did not want to be there when it happened.
It is even more challenging of a topic when clouded by the reality of one spouse dying before the other.
When the first spouse passes away, the surviving spouse may be entitled to up to 100 percent of the Social Security benefits earned by the deceased spouse.
If the higher earning spouse continues to work and delays claiming Social Security, the surviving spouse will receive a greater monthly benefit at the passing of the first spouse.
Having the conversation now about claiming Social Security later will set you up for less financial stress and strain in retirement.
Reference: Daily Journal Online (Dec. 23, 2020) “Are You Ready for Social Security? 3 Questions to Answer Before Claiming Benefits”