Social Security Planning
Social Security helps to keep everything well in hand because Social Security benefits provide income that you cannot outlive while at the same time adjusting for inflation. The number one fear that retirees face is running out of money because of longevity. Social Security benefits may at least partially offset this potential problem. However, despite this critical component of successful retirement planning many people do not factor in the vital questions of when and how to take Social Security. Our job is to help educate you in making these important decisions.
To begin, the most important rule in Social Security planning is to consider the timing of collecting Social Security as part of your own personal financial plan, with an eye toward maximizing the lifetime value of these payments. At Bishop Wealth Advisors we are willing to show you how to integrate your decisions regarding Social Security into your overall retirement planning.
You will find in our discussion below just a few important considerations. For a more in-depth analysis based on your own individual circumstances, please Contact Us for an appointment or to receive a Social Security Strategy Report
Social Security – Preliminary Considerations
As a number one priority, married couples in particular should make sure they know the rules about how benefits are calculated and how they can be claimed in order to maximize their Social Security payouts. Even though retirement benefits can be claimed as early as age 62, the cost of that decision is a 25 percent reduction in monthly income for life. On the other hand, delayed retirement credits can be earned by those who wait, adding 8 percent per year to benefits until age 70.
Spouses can claim retirement benefits based on their own or their partner's work record. But spousal benefits cannot be collected until the primary worker has applied for his or her own benefit. Spouses may receive the higher of their own worker benefit or one-half of their spouse's benefit.
Critical planning scenarios for couples revolve around the availability of delayed retirement credits and spousal benefits. It is possible that the best approach will be for one spouse to delay collecting benefits to as late as age 70, maximizing both his and her own benefit and providing a larger survivor benefit for his or her spouse. Any decision that is made ultimately sets up an income stream that he or she cannot outlive and that is constantly adjusted for inflation. Since a 65-year-old couple has a nearly 60 percent chance that one or both of them will live to age 90, maximizing this guaranteed lifetime income stream makes sense. Contact Us for a Social Security Strategy Report
Waiting by one spouse does not necessarily mean that both need to give up current cash flow. If a financial plan calls for immediate income or cash flow, couples can still maximize benefits by having the lower-earning spouse file for his or her own benefit early. In that case, the higher wage earner delays receipt of benefits to age 70. Once the higher-earning spouse reaches full retirement age, the lower earning spouse may be able to switch to a larger benefit.
In conjunction with this scenario, the higher wage earner will use a "file and suspend" strategy by filing for benefits but delaying receipt of them until age 70. Then when the higher earner files for benefits, the lower earner becomes eligible for his or her spousal benefit, which may be higher than the reduced worker benefit already being collected. This approach is a good way to provide current income without needlessly sacrificing guaranteed lifetime income. Let us help you receive the maximum outcome from your Social Security Planning.