Did you know that your social security strategy you choose is actually quite complex? There is a lot to consider – your age, marital status, whether you are working, your health, longevity, cash flow needs, and tax situation, just to name a few.
At Marshall & Sterling Wealth Advisors we offer a full social security analysis within our financial plans, and we help clients decide what social security strategy will maximize their dollars they receive, based on their individual situation.
In addition, I am holding two complimentary Social Security seminars this spring for those who’d like to learn more. Space is limited so registration is required! You can read more and sign up for the informative sessions here:
March 4: How to Protect your Significant Other with your Social Security(Seminar is full)- March 11: Social Security – What Every Woman Needs to Know
Here are 5 facts about social security that many people aren’t aware of yet, are extremely important!
1. The age you select to start taking social security affects your benefits for life.
You have a choice as to when to collect your social security, anytime between the ages of 62 and 70. Everyone has a “full retirement age”, which is the age you turn in order to collect your full social security benefits. For those born before 1954, your full retirement age is 66 years old. For those born 1955 – 1959, your full retirement age is somewhere between 66 and 67. And for those born 1960 or later, your full retirement age is age 67.
If you collect earlier than your full retirement age, your benefit will be reduced up to 75% of your full social security amount. This reduction is locked in for life. On the other hand, if you delay collecting your social security past your full retirement age, your benefit grows at about 8% per year. This higher amount is also locked in for life.
It’s important to determine what social security amount is optimal for your individual cash flow needs, now and in the future. Do you start your benefits earlier but receive less, or start your benefits later and receive more? The analysis of “taking versus delaying” is one of the biggest pieces of a social security strategy.
2. You can still work and collect social security.
t’s true. Although, your age will determine exactly how much you can earn and still collect.
If you are over full retirement age, still working, and decide you want to take your social security, there is no limit to how much you can earn. You can still collect in full and your earnings will not reduce your benefit.
If you are younger than your full retirement age, your benefits you collect will be impacted by the amount you earn. You can earn up to $18,960 in 2021 without any reduction to your social security. For every $2.00 after that, your social security benefit will withhold $1.00 of benefits.
In the year of your full retirement age, you are limited to an income of $50,520. For every $3.00 after that, your social security benefit will withhold $1.00 of benefits.
3. Your health matters in your social security choice.
Your health is a prime component of the “taking versus delaying” conversation I mentioned above. If you delay your social security, the question we consider is “when will the higher amount you are receiving make up for the income you could have received if you started your benefits earlier?” This is a calculation we run for every client and typically is in the low 80’s age range. So, if you have longevity in your family or are a healthy person, delaying may make sense as you are anticipating living into your late 80’s (or even 90s!). In addition – thinking about the longevity of your spouse is key as well, as the surviving spouse will have a higher income level for the remainder of their life if benefits are delayed.
4. Divorcees and surviving spouses have some added social security benefits.
If your previous marriage ended in divorce, if it lasted over 10 years, and if you are currently unmarried, you may qualify for divorced-spouse benefits. Meaning, you can collect social security off of your divorced spouse, without any impact on their own benefits. If you’re divorced and your ex-husband is deceased, you may qualify for divorced-spouse survivor benefits.
If you were married and your spouse passed away, you are eligible for survivor benefits. Survivor benefits still as of today, have an added benefit of being able to delay one benefit, such as your own, while collecting the other. This is one of the few circumstances that still allow this.
Both of these are alternatives to your own social security benefit that can help you maximize the amount of money you receive at the end of the day.
5. Women even more so than men need to review and stress test their social security strategy.
I believe women even more so need to review their social security strategy, why? Statistically speaking – women live longer. So whether it’s her own benefit to analyze, or a benefit with her spouse, longevity and longer life expectancy needs to be considered, as it is more than likely a woman will outlive a male partner. Social security is guaranteed income for life – making it an extremely powerful tool for longevity.
Additionally, out of women and men, women statistically are more likely to take a break from their career, whether for childcare, caregiving for parents, or another reason. Ultimately, your highest earning years determine your social security amount, so any impact to your earnings will trickle down to a future social security benefit. In addition, the less lifetime earnings are made, the less other retirement contributions are being made as well. The value of social security becomes higher for women and this makes it more imperative for social security to be maximized.
Any questions on these items, I encourage you to sign up for one of the social security seminars. Or, feel free to reach out to me at any time for a discussion. We are here to help.
Article by: Kelsey Ponesse, CPA
Wealth Planning Advisor with Marshall & Sterling Wealth Advisors, Inc.
Securities offered through LPL Financial, Member FINRA/SIPC. Investment Advice offered through Marshall & Sterling Wealth Advisors, a Registered Investment Advisor. Marshall & Sterling Wealth Advisors and Marshall & Sterling Wealth Management are separate entities from LPL financial.
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