One of the questions we are often asked at Financial Enhancement Group is when should I/we take our Social Security benefits? In a serious but joking way, I generally respond with, “How long will you live?” It’s not a question anyone can answer with any certainty, which creates a significant risk when planning for retirement. Your retirement may last for a long time, and you will need to have enough income to live comfortably without running out of money.
Retirement income planning can be like hitting a moving target in the wind. The target is moving forward and back because we do not know how long we will live in retirement. Will it be one day or 40 years? However, you do need the certainty that you won’t run out of income in retirement. This is where Social Security steps into the picture.
According to the Social Security Administration, for just over 60 percent of retirees, Social Security represents more than half of all their retirement income. In 2020, roughly 65 million Americans received over one trillion dollars in Social Security benefits. Social Security is a core part of the retirement picture in the United States.
Social Security is the cornerstone of retirement income for many Americans, and it delivers a steady stream of lifetime income that adjusts for inflation. In 2022, the increase in Social Security benefits is going up by 5.9%. If you spend one day in retirement or 40 years, you cannot outlive your Social Security benefit.
Many different strategies exist for claiming Social Security. The one you choose will depend on various factors, including your current savings, your health (and the health of family members), your legacy goals, future taxes, and other issues.
The timing makes a difference, too. In general, you can take benefits early (if you’re willing to accept up to a 30 percent lower benefit), take benefits at “normal” or full retirement age, or delay your benefits until age 70 and receive a higher payment. If you’re married, the decision can affect how much income your spouse and dependents receive, as well.
Suppose you can afford to delay taking benefits. In that case, you may be able to minimize the risk associated with increasing longevity because you’ll receive more monthly income from Social Security once you start to take it. Also, it may allow you to create a strategy to draw off any tax-deferred assets and potentially reduce future required minimum distributions (RMD’s) from tax-deferred accounts.
When it comes to making your Social Security benefit election, there is not a one-size-fits-all answer. You must consider many variables, and they need to be well thought out. All of the families we take care of at FEG are unique, and their life circumstances are different; so are you. I would recommend if you’re not familiar with claiming strategies, to seek the help of a fiduciary professional before registering for your Social Security benefits.
The Financial Enhancement Group is an SEC Registered Investment Advisor. Securities offered through World Equity Group, Inc. Member FINRA/SIPC. Advisory services can be provided by Financial Enhancement Group (FEG) or World Equity Group. FEG and World Equity Group are separately owned and operated.