Social Security Planning

What are the benefits of Social Security?

Unlike other sources of retirement income, Social Security offers a unique combination of benefits.

A Predetermined amount of income. By the time you come to the end of a long working career, the amount of Social Security income you will be entitled to is pretty well known. The benefit is based on your earnings history as it is applied to a formula. While the amount may vary depending on when you apply for benefits (delaying benefits results in a larger amount), the relative accuracy of the estimate makes it easy to build the rest of your retirement income.

Steady Income. Once you have qualified for Social Security benefits, the amount of income you’ll receive is set. Some people worry that benefits my be cut in the future, but it is highly unlikely that benefits paid to current retirees will be significantly affected by the proposals to reform the Social Security System.

Lifetime Income. Social Security is one of the few sources of income that can be assured of never running out.

Inflation-adjusted income. Social Security benefits are usually increased each year based on the previous year’s increase in the Consumer Price Index. These cost of living adjustments retirees keep up with the rising cost of living.

The questions now is when is the optimal time to start taking Social Security Benefits. You can technically start benefits at age 62 at a reduced amount. The other issue with starting benefits at the age of 62 is if you continue to work benefits will be taxed a dollar for ever two dollars earned. The taxed penalty goes away if you wait to Full Retirement Age to take your benefits even if you continue to work.

So, people want to take advantage of the benefits increasing by 8% per year up to the age of 70, prorated monthly.

So, when is the best time to take your benefits? Well, that depends on several things. The first is your life expectancy. We can run calculations on break even scenarios between starting at full retirement age verse age 70. The second factor you need to look out is spousal benefits. Is your spouse going to benefit more by taking half or your benefit versus what their own benefit will pay them.

Other factors to consider is divorced benefits and survivor benefits. We can assist you in evaluating all your options when it comes to Social Security and your retirement income.