It Just Doesn't Have To Be That Confusing!
One of the most fundamental questions facing baby boomers today is how can I get the most out of my Social Security benefit?
We at ProVest Wealth Advisors want to help you understand your rights regarding Social Security, when the best time is to file, how your work affects your benefits, the best way to coordinate your and your spouse’s benefits, planning for survivor benefits, what your rights are as a divorced spouse, and how best to avoid taxes on your benefits. Filing for Social Security is a decision you only get to make once. So be sure that decision is an informed decision.
We receive many Social Security questions both from our clients, as well as our radio listeners. This is our Social Security question of the month:
Question: “I’m 61. Why should I delay claiming my Social Security if the average person will get the same take from Social Security regardless of when they claim?”
Most people won’t live out an “average” life. If you’re 61 today, you have an “average” life expectancy of 17 more years if you’re a man. A woman, statistically, has about 21 years left to live. But that includes everybody. If you don’t smoke, if you keep your weight under control, if you don’t jump out of airplanes and if you exercise regularly, you’ll most likely live longer than the so-called average.
There’s an 8 year window in which you can claim your Social Security monthly benefit, from age 62 to 70. If you stop working at age 62, but you wait until age 70 to claim your Social Security benefit, you’ll receive 76% more in your check each month than you would if you’d started your income at 62, but you’ll miss out on the 8 years of monthly benefits from Social Security had you started collecting at 62. So… which is better? Well, we believe that all things being equal, delayed, or what we call bonus, claiming is generally the better bet. If you delay taking your Social Security check you will lock in a permanently increased benefit for the remainder of your life. So while it’s true you will receive fewer years of checks, on the good side you will have more income in advanced ages when you are more likely to need the money. I think of it as “longevity insurance,” or insurance against growing poor in old age.
Another reason to delay applies if you’re married. The amount of a survivor benefit depends on two things: (1) when the decedent took his Social Security benefits and (2) when the widow claims the survivor benefit. In other words, if you delay taking your Social Security benefit to 70 and your wife survives you, she is eligible to receive your maximum benefit as her survivor benefit. It may be a stereotype, but in the “traditional” retirement scenario the husband usually earns more than his wife and he usually dies first. A widow is far less likely to grow poor in old age if her late husband had delayed his benefits