So you're turning 60 and thinking about the best time to begin your Social Security retirement benefit. We have all heard of the heap of trouble the program is in, so this should be a no-brainer decision right? Just sign me up for the earliest possible withdrawal right? After all, I want to get the most money out of the system before I die or it goes broke, so start ASAP - right? WRONG! The trust fund is not going broke soon. Its fully funded until 2024, and expected to be fine until 2037 - without any fixes.
Things to consider:
First, everyone needs to understand that once you begin your social security benefit, it is by and large an irrevocable decision, and you are stuck with it.
Second, you need to consider if you will be done working by age 62 (the earliest age possible to begin your withdrawal benefit). If you are still making earned income (wages / salary) of more than $15,120 annually, then you will need to return $1 of social security benefit for every $2 you earn above this figure. That's right -upwards of 50% of your benefits are subject to being recaptured by the government if you are still working or you go back to work prior to your Full Retirement Age (FRA). Also, remember point 1 above - you're stuck with this.
Next, understand that this decision is intertwined with your overall retirement income, which includes the concern of outliving your savings or retirement assets. Claiming social security as early as possible may make sense, but normally only when one dies well before age 80. If you're not certain about dying before age 80, then you may want to consider this decision further.
It gets further complicated if you are married, and your spouse is entitled to either your or their own social security benefits. As each of you have 9 years to choose from (you really can go at any month in between, but let's keep it simple and reduce it to years), that means 9 X 9 or 81 combination of choices to consider. Now toss in a previous marriage, and things can get real interesting.
I don't mean to over complicate this just for the sake of doing so either. Many of these 81 combinations result in very minor differences, with the best solutions skewed to a grouping age area. Yet, not having considered a claiming strategy at all is like going on trip without a destination or a budget. It may work out, but I wouldn't recommend it.
What I do recommend is getting in front of this decision and either learning what you need to know or find a resource that can help. For many of us, this is one of the biggest retirement decisions we have to make, so treat it that way, and find the best answer for your situation.
Pete Thoresen
Financial Advisor
Focus Financial Network, Inc.
1000 Shelard Parkway, Suite 300
Minneapolis, MN 55426
952-225-0344 direct | 952-591-9770 main office
Securities offered through Royal Alliance Associates, Inc., member FINRA/SIPC. Insurance and investment advisory services offered through Focus Financial Network, Inc., a registered investment advisor not affiliated with Royal Alliance Associates, Inc.
