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Social Security Retirement Benefit Strategies

Planning on when to start drawing social security retirement benefits is a complicated issue. There are too many possibilities to cover them all in a short article, but we can touch some major issues.

One issue is when to start taking benefits. You can take them as early as age 62 based upon your earnings during your work career. But taking them can have several drawbacks. First, your benefits will be permanently reduced by as much as 25% relative to waiting to your normal retirement age. If you live a long time, this could mean a loss of thousands of dollars. Also, if you draw the benefit and still keep your job, your benefits are often reduced until you stop working.

One benefit of waiting until your full retirement age, which is now about age 66 for those about to retire, is that benefits are not reduced if still working. Also, if you delay further, the benefit amount rises each month you wait until age 70. This means if you are long-lived, you will get thousands more that if you start to draw money at your normal retirement age.

Underlying the above discussion is your anticipated life expectancy. You can go on line and gather information for Americans, but your case is individual. You may have a family history of those living into their nineties or only into their mid 70s. Whatever your estimate can color your decision on whether to delay or take the retirement benefit early.

Another issue is whether you can afford to quit working. Social Security retirement benefits were never intended to, and rarely do, provide for the retirement you seek.

The issues are compound when you are married as each spouse, depending on their work history, may be entitled to benefits. Without doing considerable analysis, which to take first and when is impossible to determine. No rule fits everyone. But commonly, if you can afford it, waiting is better. But again individual cases can be different.  

Another factor is taxation of the benefits. Depending upon your family income level, a portion of the benefits can be taxed. Obviously if the benefit is taxed, you will have less spendable money for your family.

For a married couple, the decision as to when to draw retirement benefits may affect the spouses benefit in event of death of the recipient of the benefits. While we can not control the timing of a spouse’s death, we do need to consider the possibility and ramifications.

This video and text is for information use only and is based on information believed to be true. Much of the information is readily available, but some is drawn from Advisor Products and FAClient articles. The reader acts on these ideas at their discretion and should consider consulting an accountant, financial advisor, or attorney. No promise is made that an idea or concept is appropriate or would work well for the reader. This is not an offer to provide legal advice or act as an attorney.

Contact Steven Erickson JD, MBA, CFP(R), Accredited Wealth Management Advisor, Chartered Retirement Planning Consultant at 573-874-3888 steve@EricksonFinancialSolutions.com, if you have questions or to set an appointment. Serving Clients in Columbia, Jefferson City, and the surrounding counties.