Thirty nine percent of those recently surveyed by Nationwide Insurance don’t know at what age they’re eligible to receive full Social Security benefits, and 70% said they wish they knew more about this complex topic. In general, if you don’t need Social Security income to make ends meet, there are huge advantages for delaying your benefits as long as possible. For every year past the minimum retirement age of 62 you wait, up to age 70, you’ll receive an 8% increase in payments. And if you wait until your full retirement age (65-67 depending on the year you were born) your benefits won’t get cut if you’re still working and earn over a certain amount. Unfortunately, these scenarios become more complicated at the household level. For example, if you and your spouse were born before 1954, you may be able to claim spousal benefits. If you’re divorced you may or may not be able to claim some of your ex-spouse’s benefits. And if your annual income is above a certain level, between 50%-85% of your benefits may be subject to federal taxes. It’s critical to view any Social Security scenario within the context of your overall life expectancy and retirement planning strategy, which should consider projected future expenses—including Medicare and long-term care costs--and additional income from part-time work, pensions, 401(k) plans and IRAs. Given the complexity of these issues, you may want to work with a fee-only financial advisor who can help you make more holistic retirement planning decisions. However, it’s important for the advisor to fully understand the rules around Social Security and Medicare. If they don’t, they should have access to accredited professionals who can help them—and you—make these critical decisions.
For further research:
- Next Avenue, Where to Get Help to Claim Social Security Wisely
- Terrysavage.com, Social Security Timing
- Livingto100.com: Use this site to estimate your life expectancy.
- Social Security Administration: Get basic information on Social Security and set up a My Social Security account that can help you estimate your future benefits based on your earning history.
- Laurence J. Kotlikoff: Author of Get What's Yours: The Secrets to Maxing Out Your Social Security and the Maximize My Social Security tool.
- National Association of Registered Social Security Analysts; National Social Security Association; Corporation for Social Security Claiming Strategies: Three educational organizations that offer professional credentials for professionals who wish to advise clients on Social Security and Medicare issues.