Social Security plays a vital role in the distribution phase (when you begin taking money out of instead of putting money into your retirement accounts) for many retirees. Deciding when to elect the benefit is probably the largest question people will face.
A sound Social Security filing strategy depends mainly on your personal situation. Not electing your benefit at the correct time could cost your family A LOT of money over your lifetime! We can help you determine the timing of your Social Security election, so your income is maximized.
In general, a few facts to consider:
From this point forward, the program will need to withdraw money from its reserves in order to pay out full benefits. If no changes are made, Social Security will run out of money in 2034. Scary stuff considering that 34% of retirees depend on the program for 90% of their income according to information from the Social Security Administration.
Can this really happen?
We sure hope not! Both changes in tax policies and tinkering with the benefit formula have already been proposed, and the election age has increased from 65 to 66…and is heading to 67. Obviously, there is a major need to address the future shortfall and we are most likely looking at a reduced version of the program for future generations.
Social Security is complex. The system has 2,728 (and counting) core rules! And thousands of codicils designed to clarify those rules. Understanding and interpreting these rules is difficult and time consuming. Most people do not put much thought into it, and simply elect when they think they are supposed to elect. It pays to know when your time is right.
You may elect your benefit at age 62, but your benefit will be approximately 30% smaller than if you wait until your full retirement age. And if you wait until age 70, your benefit amount will have increased by 8% each year you waited to elect! We are talking big money here…a typical married couple will have received more than $1 million in benefits over their lives. So, unless you are terminally ill, or have no other source of retirement income at age 62, you want to sit down with an expert to determine when you should start receiving your benefit, and we can most definitely help you.
If you elected your benefits early, and you may now realize that it was a mistake, Social Security does have some flexibility. Recipients who start their benefits early have exactly one year to change their minds. There is a drawback: You must repay all money received from Social Security, AND if you have your Medicare Part B and D premiums deducted from the Social Security payments…you have to pay that back too. Those are the rules.
Like most things in life, investigate and explore…everyone has a different situation, so developing a sound strategy will pay off in the long run. At MWM, we will present ALL your options concerning Social Security and show you how it works with your overall retirement income plan.