From the Desk of Charlie McCullough
Having aging parents who are collecting social security benefits has made me consider how long these benefits will be available and if my wife Lisa and I will be able to count on them for our retirement. When I talked to my financial advisor at Financial Fiduciaries, he told me that social security can be a very complicated thing because there are a lot of variables to consider.
Longevity is one of the biggest factors to think about. According a recent article I read, half of individuals in upper income brackets will live to be at least 95 years of age. That could be concerning for individuals who are counting on social security as their main source of income during retirement, but it also is cause for consideration for anyone who is nearing retirement age. With that in mind, here are a few things to think about when planning a timetable for claiming social security benefits.
- Timing is Everything – My advisor told me that age has a big impact on the amount of money you will receive from social security benefits. While you are able to claim your benefits when you reach your full retirement age (between ages 66 and 67 depending upon your birth year), if you wait until age 70, the amount of benefits received increase. Many people might be tempted to take benefits as early as possible, but doing so could be a losing proposition if you are healthy and live to or past the average life expectancy.
- Delaying benefits – When you hit full retirement age, you can choose to delay benefits. Doing so will grow your benefits by 8% a year up until age 70. Any cost-of-living adjustments will be included, too, so you will not forgo those by waiting.
- Spousal Benefits – Under new laws, spousal benefits cannot be claimed until your spouse files for and receives their benefits. This means, if you don’t have a work history, waiting until your spouse files can cost months or even years of lost spousal benefits.
- Survivor Benefits – If your spouse dies first, you are eligible for survivor benefits. At full retirement age, the benefits are worth 100% of what your spouse was receiving at the time of their death, or if they had not yet taken benefits, you are eligible for 100% of what they would have received.
- Divorce and Spousal benefits – Just because you are divorced does not mean an inability to claim benefits based on your former spouse’s earnings record. If you were married at least 10 years, are 62 or older and single, you can still qualify to receive a benefit.
- Claimers remorse – If you claim your benefits and then change your mind within the first 12 months of making the claim, you can withdraw the application. You will need to pay back all the benefits you received, including spousal benefits, but you can restart at a higher amount at a later date.
These are just a few of the many considerations when claiming social security benefits. For the best information, I suggest contacting a trusted financial planner to create a plan that fits your specific retirement needs.