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Planning for Retirement with Social Security

January 27, 2017

Planning when to take Social Security benefits is a key component of preparing for retirement. It is a personal decision and varies person to person. While you can do your research and weigh all of the options, there may not be one clear decision. So, before you decide when to start your benefits, consider the following this advice.

Do

  • know your “full” retirement age
  • consult the experts
  • wait as long as possible
  • consider your life expectancy
  • consider your relationship status

Don’t

  • claim early while you’re still working unless you need the money
  • wait longer than age 70
  • depend fully on Social Security
  • expect the Social Security Administration to be your personal advisor

Do

  • Do know your “full” retirement age

“Full” retirement age is the age at which a person may first become entitled to full or unreduced retirement benefits, according to the Social Security Administration. You may be able to take your benefits at multiple ages; however the reduction in your benefit amount will be greater at certain ages. This is critical to understand and determine in order to receive your full or unreduced benefits.

 

Do consult the experts

Everyone’s financial situation is unique. Work with a trusted advisor to make sure that you fully evaluate all of your options and their financial consequences. Financial advisors and experts may be able to give you a better understanding of the “bigger picture” with regards to taking social security.

 

Do wait as long as possible

If you’re in good health and can delay taking your Social Security retirement benefits, it might be a good idea to wait. Your Social Security benefits will increase by an increasing annual percentage, until you reach 70 years of age. Waiting until your full retirement age can essentially provide a higher lifetime income.

 

Do consider your life expectancy

Retirees are living longer than they did just a few decades ago, so you need to figure out a way to try to not outlive your resources. If you do take your Social Security too early you put yourself at risk of running out of income, especially because you won’t receive your full benefits. However, if you don’t expect to live past your early 80s, taking Social Security earlier can be an appropriate decision.

 

Do consider your relationship status

When possible, it is often advantageous for the higher wage earner to delay his or her benefit to build the family’s total Social Security income. Spouses are also eligible to receive Social Security payments worth as much as 50% of the retired worker’s benefit. Married individuals, and even divorcees in some cases, have Social Security claiming options that single people don’t, so do your research in order to receive the best retirement benefits possible.

 

Don’t

Do not claim early while you’re still working unless you need the money

If you’re still working, don’t claim benefits before your “full” retirement age if you can avoid it. While you’re employed, you are increasing the underlying benefit upon which your eventual benefit will be determined. Keep in mind that reduced benefits will only apply during the years that you are working and will not have a permanent effect on benefits that you’ll receive following retirement.

 

Do not wait longer than age 70

You should never wait past age 70 since your account will no longer be earning delayed credits. Even if your life expectancy is past 85, you will not benefit from waiting to collect Social Security after the age of 70.

 

Do not depend fully on Social Security

While Social Security is a significant source of income for many Americans, it should still be treated as a supplemental retirement program. The other aspects of your retirement plan – funds from defined contribution plans, pensions or personal savings – need to be stronger to compensate. To better your chances for a comfortable retirement, don’t forget to prepare multiple income sources.

 

Do not expect the Social Security Administration to be your personal advisor

Social Security Administration employees generally don’t dole out case-by-case advice. Instead, find a trusted resource such as a financial advisor or retirement plan consultant who can help you sort through your individual questions.

 

Summary

Deciding when to take Social Security is an extremely personal decision and can ultimately be a very difficult one. It’s important to weigh all of the factors and consult your financial advisor in order to maximize the benefits that you will receive. Most importantly, don’t weigh too heavily on Social Security benefits when preparing for retirement. Rather, create a balanced and well-rounded strategy including multiple income streams to better your chances for a comfortable post-employment experience.

 

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

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