Social Security: Claim Benefits Sooner or Later?
Saghir Aslam
Rawalpindi, Pakistan
(The following information is provided solely to educate the Muslim community about investing and financial planning. It is hoped that the Ummah will benefit from this effort through greater financial empowerment, enabling the community to live in security and dignity and fulfill their religious and moral obligations towards charitable activities.)
When it comes to Social Security and retirement, you may have conflicting viewpoints: on the one side, you hope to start collecting your benefits as soon as you’re eligible after all, it’s your hard earned money. On the other side you know that, if you wait, your monthly benefit amount will increase. While it does make sense to wait as long as you can recommends you re-evaluate your situation every year in retirement before deciding whether to continue delaying getting benefits.
“If I try to convince a 62-years-old to wait until 70, I’ve lost my audience immediately “That’s why I believe so strongly in this year-by-year approach.” One item you need for that annual retirement review: a current copy of your Social benefit estimate from ssa.gov. This provides personalized estimates of future benefits based on your real earnings and lets you see your latest statement and your earnings history. Here outline a comparison of clamming now versus later, and offer keys considerations as you review your strategy each year.
Comparison: Clamming sooner verses later
Let’s start with a hypothetical example: John Doe was born in 1960 and was earning $200.000 a year when he retired. He decided to start receiving Social Security benefits as soon as he became eligible at 62, or five years before he would receive full retirement benefits. His monthly benefits in today’s dollar is $2,106.
If he had delayed receiving benefits until he was 70, he’d receive $1,700 more a month, or $ 3,806. And he would make up for the eight-year delay in not taking any benefits in about 10 years. (And because one out of every four 65-year-olds today will live past age 90, according to the Social Security is unlimited. “As long as you’re alive, the checks should continue to come.”
Make wellness a deciding factor
Your health can play a big role in helping determine when you should start taking benefits. Do your loved ones live long lives, or has everyone succumbed to illness before age 65? “It’s not the most accurate indicator of what’s going to transpire in the future. But it can have some bearing, “if you’re in reasonably good health that counsels in favor of waiting, if you’re in poor or guarded health that counsels towards drawing benefits sooner.”
Do you have enough income?
Another key factor is having other source of income to live comfortably you should consider the guaranteed rate of return Social Security offers:6.25% ( plus a cost of-living increase). That’s better than the guaranteed rate of return in today’s market.
Considerations for married couples
Arthur advises married clients to look at multiple factors to determine the timing for each spouse to claim Social Security benefits. For example, if your spouse is working full time and you’re working part time or seasonally, his or her Social Security benefits may be dramatically higher than yours. It’s shall wise for both of you to wait, if possible.
“Not only does it increase the size of the benefits that the [higher-earning] individual personally receives, but it also increases the size of what’s known as the survivor’s benefits that the [lower-earning] spouse could draw if the individual passes away. Keep in mind that the current average life expectancy of a 65-year-old man in 84 years, while a woman that age can expect to live until age 86.
What about taxes?
When it comes to when to claim Social Security benefits, not to focus primarily on the tax ramifications. “The vast majority of people that I counsel, their marginal tax rate in retirement will be fairly constant , “ if retirees were to take their Social Security benefits at 62, what I typically see is their marginal tax rate is exactly the same or approximately the same as it would be if they claims the benefit at age 70. “I want [them] to focus instead on maximizing the net cash flow over the remainder of their lifetime.
(Saghir A. Aslam only explains strategies and formulas that he has been using. He is merely providing information, and NO ADVICE is given. Mr Aslam does not endorse or recommend any broker, brokerage firm, or any investment at all, nor does he suggest that anyone will earn a profit when or if they purchase stocks, bonds or any other investments. All stocks or investment vehicles mentioned are for illustrative purposes only. Mr Aslam is not an attorney, accountant, real estate broker, stockbroker, investment advisor, or certified financial planner. Mr Aslam does not have anything for sale.)
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