When To Start Your Social Security Benefits Is Not An Easy Decision

We have had the privilege to help many retired people live out their retirement with a sense of pride and independence. The one concern we very rarely see is that they have accumulated too much money in retirement accounts to completely remove anxiety and nervousness from their life. Social Security can play a big role for most retirees and is often times overlooked. There are many different ways to receive your social security payment and for the most part people either receive payments as early as possible or wait until full retirement age. In this article, we will share a case study from a real life client and how they were able to help maximize their social security benefits. Social Security isn’t a “no brainer” like society tends to suggest. Please understand this should not be considered as a recommendation to pursue a particular financial strategy or purchase a particular product, your situation will be materially different and you should consult your financial, legal and tax advisors regarding your particular situation. Instead, this case study is simply here to help educate you on what we see as a common view of social security and the potential benefits should you review your comprehensive financial situation.

In this particular situation, the husband and wife were middle class income earners and they were very good about living within their means. They saved ample dollars for retirement and were rewarded greatly in their retirement, as financial stress was minimal in their home. The husband retired at 62 and thought his best option was to take his social security payment as earlier as possible. His wife worked until age 62 as well but she planned to take her social security payment at age 70. They had sufficient savings to bridge their financial needs until age 70, so delaying her payment was not an issue. They had about 2 ½ years between their ages and had longevity in their family. Both had parents live into their late eighties to their mid-nineties.

Our conversation started with “how did you decide when to receive your social security payment?” With an “I didn’t give it much thought” kind of look in return, we discussed the various ways to receive their payments. With a quick review of the wife’s social security statement and the husband’s payment information (remember, he’s already receiving his payment), we ran a social security timing report. The purpose of the report is to help aggregate both pools together and aim to maximize the amount of money they receive over their lifetime.

What this report detailed was the following:
The husband, though he has already elected his benefit, should consider suspending his benefits at age 66. Eventually, he could resume his benefits once he turns 70. His benefit amount would increase by 8% each year. This is under current social security rules.
The wife should consider applying for spousal benefits once she turns 66. This would be roughly half of the husband’s benefit amount at his full retirement age. She continues to receive this payment until she reaches age 70. At age 70, she applies for her full benefit amount (which has grown by 8% per year since her full retirement age) and the payment she was receiving from her husband stops. The strategy compared to the “both of them receive payments at age 62” could generate over $250,000 more during their retirement assuming they live to age 95. Even if they lived to 85, the additional amount they received was nearly $100,000

This is one of the many stories we could share about working towards maximizing your social security payments; unfortunately, many retirees overlook this one important decision. If you have not already reviewed this piece of your retirement strategy, please contact us to see how much money you may be leaving on the table.

Written by David A. Nordmeier, CFP®,CFS.

This is an example for illustrative purposes only. It is not indicative of any particular investment or guarantee of future performance.
Financial Advisors do not provide tax or legal advice and this should not be considered as such. Please consult a tax or legal professional for advice regarding your specific situation.
2005163/DOFU 1-2018