Maximizing Social Security benefit
Have you seen your new Social Security statement? The Social Security Administration has completely revamped their benefit statements—they are shorter (2 pages) and now have a new bar chart on page 1 showing benefit amounts at different retirement ages. Wow. That’s a great improvement! Finally, beneficiaries like you and me can easily see what we are projected to receive at different claiming ages.
As financial planners, this chart is very helpful to understanding the tradeoffs of claiming early or waiting to claim.
For years Rick and I have been preaching the importance of waiting to claim Social Security benefits (if you can) so that you are entitled to a substantially higher and permanent benefit level.
Why is this important?
Because nearly every pre-retiree we meet with asks the same questions: “Will I be okay if I retire now?” and “Will I have enough money to maintain my lifestyle in retirement?” One way to ensure that you have enough is to maximize your Social Security benefits.
While some clients will need to claim benefits early or at their normal retirement age (usually age 66 or 67), many will be better served by waiting and claiming a larger benefit.
One of the beauties of waiting to claim is that the higher benefit will last the rest of your life. Just by waiting three more years and claiming at age 70 instead of 67, beneficiaries will receive a benefit that is 24% higher.
For example, the maximum individual benefit at your full retirement age is $3,148 per month (2021). However, if you wait until age 70 to collect, the benefit rises to $3,895. That’s an additional $747 per month or 24% more.1
In addition, you’ll receive three additional years of cost of living increases, too. With inflation picking up in 2021, beneficiaries will receive a 5.9% cost of living adjustment (COLA) at the beginning of 2022, the largest increase in decades.2 And, that will be on top of the higher benefit from waiting.
With Americans living longer, especially higher income folks, one of the biggest risks retirees face is outliving their money. By waiting to collect, many beneficiaries will receive substantially higher income for the rest of their lives.
Of course, some retirees may need to collect as soon as they are eligible. So, its important to consider your particular circumstances before electing benefits. Remember, once you sign up for benefits, you cannot decide to unenroll if more than 12 months have passed.
If you have questions about Social Security and your retirement, give us a call, we’re here to help. You can schedule a quick call with me by clicking HERE.
Lyman H. Jackson Lyman@PlanWithFPS.com
617-653-3303
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1Source: https://faq.ssa.gov/en-US/Topic/article/KA-01897 Social Security benefit calculations are complex. Some beneficiaries may be subject to maximum family benefits.
2 Source: https://www.ssa.gov/news/press/factsheets/colafacts2022.pdf retrieved 11/3/2021.
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