Security in retirement

On Aug. 14 1935, President Franklin Delano Roosevelt signed the Social Security Act into law.  In 1937 Earnest Ackerman earned the very first Social Security payment of 17 cents.  A lot has changed since 1937. According to the Social Security Press Office, in 2013 alone: 57 million people received a total $68.5 billion every month, yet the foundation behind FDR’s vision has not wavered, “Help individuals and their families meet the fundamentals of survivorship.” 

Deciding when to begin taking retirement benefits from Social Security is a personal decision, yet the concerns shaping your options have changed significantly. Financial resources, spouse’s needs, your current health, and family history must factor into your decision when to begin collecting.  However these factors play a role, understanding your decision to begin collecting Social Security and the role it plays in retirement income planning may be the most important financial decision you make in retirement.

Let’s address a few opportunities available to help enhance your Social Security payments in harmony with your retirement income streams.

Beginning payments too early may cost you tens of thousands of dollars. Worse, pulling the trigger too quickly may hurt you significantly in your final years, when it’s too late to do anything about it. While you may begin receiving your Social Security benefit at age 62, the amount of your benefit, in many cases, is 25 percent less than what you would receive at your full retirement age (66 years old for anyone born before 1960; 67 years old thereafter). Furthermore, if you are able to delay receiving your benefits until the age of 70, you will receive additional “retirement credits” every year between your Full Retirement Age and age 70, which currently amounts to an increase of 8 percent each year, according to the Social Security Administration. Therefore you may be significantly rewarded for waiting until you reach the age of 70.  This advanced level of payment offers relief for other income streams earmarked for your core expenses in retirement, in the end maintaining more available assets to fulfill your legacy planning goals, retirement dreams and wishes.

A communal benefit to help married couples enhance their retirement income planning is a strategy called “Claim-and-Suspend.”  This strategy offers a way for married couples to maximize their social security benefits throughout retirement, and makes a lot of sense for couples in a situation where one spouse was the traditional breadwinner and the other earned substantially less. Beginning at full retirement age, a spouse has the choice of filing relative to his or her own work record or the work record of the spouse. Any decision to collect spousal benefits rather than your own from ages 66 to 70 is part of this strategy designed to increase the couple’s cumulative lifetime benefits. Bear in mind, the ability to “Claim-and-Suspend” is only available to people who have reached full retirement age, so filing at age 62 takes this option off the table. 

Each person and family situation is unique; do not assume that generalities apply when it comes to you and your family. Furthermore, do not allow negative commentary about the future of the Social Security system interfere with your need to understand the role it plays in your retirement income goals. Be informed and meet with your retirement planner.

Andrew S. Miller is a Chartered Retirement Plan Specialist with the College of Financial Planning. Send your questions to  amillerri@gmail.com.