There’s so much at stake when it comes to determining your ideal retirement plan. How do you ensure you’re getting the most from your hard-earned Social Security benefits?
Deciding when to file can be confusing enough, as you attempt to juggle the many variables that determine your optimal plan. Yet plenty of misinformation persists around this topic, making it even more difficult to navigate this complex decision.
That’s when having someone on your side really makes the difference.
Our clients count on us to firmly understand their financial blueprints — better than they could possibly understand themselves. They trust us to establish financial plans today, with a vision of tomorrow, so they can enjoy the promise of retirement just as they’ve always imagined.
To help you do the same, here are the seven most pervasive myths about Social Security, as well as the truths that will help you achieve more in retirement.
- Social Security won’t be around when I need it.
While Social Security isn’t currently in danger of being totally depleted, the trustees have predicted that benefits could be affected by 2033 to 2037. Younger, working Americans continue to replenish Social Security, as does the earned interest on its bond portfolio and the income tax on earned benefits from higher-income retirees. Yes, the existing surplus could be depleted if no further legislative action is taken, but future retirees are likely to receive between 75% and 80% of the benefits promised — not 0%, as many fear.
- Social Security alone can support your retirement.
Even if you receive 100% of your benefits, Social Security benefits alone likely can’t support a retiree. It’s true that benefits are adjusted for cost of living increases, but they were always intended to supplement — not replace — retirement savings. Looking at one month of benefits at random, the average retiree receives about $1,404 per month. That’s simply not enough to rely on in a decades-long retirement, especially in the unpredictable event of a health challenge. That’s why it’s vital to maximize your retirement strategy for as long as possible.
- File as early as possible.
Some think it’s best to file as early as possible, since they don’t know how long they’ll live past Full Retirement Age (FRA). While that assumption seems logical, it doesn’t account for all the variables. Filing as soon as you’re able could mean you’re permanently reducing your benefits. Your advisor can help you calculate your break-even point, based on your statistical life expectancy and family history. Higher earning spouses, in particular, may want to delay as long as possible, to maximize their benefits and ensure a higher payout for their widow or widower, if that becomes the case.
- File as late as possible.
As you may be starting to see, finding your optimal filing date isn’t a one-size-fits-all strategy; each person has a unique situation that usually requires a precisely calculated and completely unique filing date. While the vast majority of applicants can benefit from filing after FRA, there are some instances where you may want to file early. Retirees who want to spend the most money during their prime years may want to file earlier, for example. (Should you change your mind, you can file a one-time do-over within 12 months, and a financial planner can help you with the details in this instance.)
- If you continue working after filing a claim, you’ll lose benefits.
If you file before your normal retirement age and continue to work, your benefits will be temporarily reduced, depending on how much you earn. Those benefits, however, are merely delayed until FRA — not lost forever. Once you reach FRA, you’ll receive increased monthly payments to make up the difference. Plus, you could actually increase your annual benefit because Social Security is based on your 35 highest years of income.
- If you’ve never worked outside the home, don’t count on benefits.
While regular benefits are based on an employment record of at least 40 quarters, you can receive benefits based on the record of your spouse or ex-spouse. As long as you’re married at least 10 years and haven’t remarried before the age of 60, you may receive half of what your spouse or ex-spouse would receive. Surviving spouses can even earn full benefits, and surviving ex-spouses can receive benefits if they didn’t remarry before the earning spouse passed away.
- Do what your friend or family member did, and you’ll have everything you need.
Filing for Social Security based on advice from friends and family may work just fine for you. You may not, however, be maximizing your benefits without the guidance and detailed calculations of a financial planner, and you could leave thousands of dollars on the table. Conversely, one consultation may be all it takes to help you create the retirement lifestyle you’ve always imagined was possible.
If you would like more in-depth information about Social Security, we provide a reliable guide to understanding Social Security here. To calculate your optimal benefits with a professional, please contact [email protected] to set up a call.
About Vance Wealth:
Since 2003, Vance Wealth has served as a premier financial planning practice passionately committed to helping clients and families succeed at every step of their financial journey. Serving Southern California, the practice delivers innovative and comprehensive wealth management strategies precisely customized to each client’s goals and needs. Our mission is to help our clients and families succeed at every step of their financial journey, inspiring them to achieve more. We are committed to stand by their sides to help make the difficult decisions, celebrate life’s joys and be a trusted partner for every moment in between. To learn more, call 661-775-0950, email [email protected] or visit VanceWealth.com. To keep up with more exciting news, follow @VanceWealth on Facebook.