If you’re approaching retirement, you likely have a number of big decisions on your plate. You may be trying to decide exactly when to leave your job and how to make a seamless transition into retired life. You might be reexamining your investments and considering new allocations. You could even be thinking about relocating or downsizing. Retirement is a busy time filled with many important choices. One of the biggest decisions you’ll face, though, is when and how and when to file for Social Security benefits. More than 90 percent of Americans over the age of 65 rely on Social Security for a portion of their retirement income.1 You may assume that filing for Social Security is as simple as completing and submitting the paperwork. It’s actually a bit more complicated than that. There may be some circumstances where a filing could be changed, but generally, once you file, your benefit amount is locked in. That’s why it’s so important that you do your research and make the appropriate decision. Below is a three-step process to help you analyze your options and make the best decision for you. The earlier you start this process, the more flexibility you may have to consider other income streams and explore a variety of options. Step #1: Estimate all of your retirement income. The first step is to itemize all of your income sources and project the amount of monthly income you will receive from each source. If you have a pension, you can get a benefit estimate from your human resources office or plan administrator. You may need to take distributions from your IRA or 401(k) in retirement. Estimate a conservative withdrawal amount. You want enough income to meet your needs, but you also want to limit your distribution so you don’t drain your account. Also, consider other sources like rental income or part-time work. Finally, you can visit Social Security’s website and use the benefits estimator to project your retirement income. Add up all of your income sources to determine your total monthly income. Step #2: Project your expenses. The next step is to create a projected retirement budget and estimate your monthly expenses in each category. This is an important step, because it gives you an idea of how much money you will need to support your lifestyle. Try to limit your costs, but also be realistic about your needs and your spending. Then compare your projected income with your expenses. Do it once with all income involved. Then compare again by excluding Social Security. Do you have enough income from other sources to delay Social Security? Or do you need Social Security benefits as soon as possible? Step #3: Decide when to file. The timing of your filing is so important, because it determines the amount of your benefit. Your full retirement age (FRA) is the earliest age at which you can file without seeing a reduction in your benefit. Most people reach their FRA between their 66th and 67th birthdays.2 You can file as early as age 62, but your benefit would likely be reduced depending on how much time is left until you reach your FRA. For example, if your FRA is 67 and you file at 62, your benefit could be permanently cut by 30 percent. If your FRA is 67 and you file at 66, your benefit would be reduced by 6.7 percent.3 If you can afford to wait past your FRA to file, you’ll see a permanent increase in your benefits. Social Security offers an annual 8 percent credit for each year past your FRA that you wait to file. The longest you can wait is to age 70. However, if your FRA is 66 and you file at 70, your benefit could be permanently increased by 32 percent, or 8 percent for four years. Clearly, there’s benefit to waiting. However, that may not be feasible for everyone. If you need help planning your retirement income strategy, contact us at Baacke Insurance Services in Sarasota, Florida. We can help you analyze your needs and develop the appropriate strategy, including Social Security benefits. Let’s meet soon to discuss your goals. 1https://www.ssa.gov/news/press/basicfact.html 2https://www.ssa.gov/planners/retire/retirechart.html 3https://www.ssa.gov/planners/retire/delayret.html This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. The material is not intended to be legal or tax advice. The insurance agent can provide information, but not advice related to social security benefits. Clients should seek guidance from the Social Security Administration regarding their particular situation. The insurance agent may be able to identify potential retirement income gaps and may introduce insurance products, such as an annuity, as a potential solution. Social Security benefit payout rates can and will change at the sole discretion of the Social Security Administration. For more information, please consult a local Social Security Administration office, or visit www.ssa.gov 16071 - 2016/9/1 Comments are closed.
|