by Robin Nutting, CLTC®
The money taken out of your paycheck every month may be unwelcome now, but it can give you monthly income later in life.
However, some question if Social Security will last long enough for those in the workforce now to be able to receive these benefits. According to Social Security trustees, enough reserves exist for the system to pay 100 percent of promised benefits until 2033, without further reform. Full benefits are available at age 65 for those born before 1938, gradually increasing to age 67 for those born in 1960 or later. There is more to Social Security than just applying for retirement benefits when you are eligible at age 62 or over. By waiting, you can maximize your benefits, which will increase every year you choose to wait to file for Social Security retirement benefits.
Consider these four tips before applying for Social Security.
- Don’t assume it won’t be there. Social Security is projected to last at least until 2033, so the first mistake is writing it off as a resource that won’t be available. Planning early for the role Social Security will play in your retirement will prevent you from being caught off guard and missing out on increased benefits once you are ready to start collecting.
- Know your situation. Retirement income planning is critical. Social Security has many nuances, so a personalized approach is necessary to get a better grasp of your retirement future. By using your current information from the Social Security Administration, financial representatives may be able to create scenarios to give you an idea of how the age you begin receiving distributions can affect the monthly amounts you will receive. For example, if you’re divorced or widowed, a financial representative will be able to calculate the different ways you can claim benefits and how they can affect your retirement strategy.
- Wait to draw. Now that you are planning for it, you can figure out the right time for you to start receiving benefits. For many people, this will be after the age that you are eligible to start collecting full benefits. For every year that you delay, Social Security benefits will increase by a set percentage, eventually putting your monthly benefit above 100 percent. Delaying can also multiply the benefits after it is adjusted for cost-of-living and can potentially reduce the number of years benefits are subject to income taxes. Factors to consider as to when to file for your Social Security benefits include: health status, life expectancy, need for income, future employment and survivor needs. A financial representative can help you build all of this information into an overall retirement strategy.
- Get your financial house in order. If you delay your Social Security benefits, you will need to have another way to pay for your needs while you are not working. If you planned early enough, you will likely have adjusted your finances so that you are prepared. Again, talking to a representative can help you plan the best option for the interim time before receiving Social Security.
Social Security can be confusing, but talking to a representative can help you clarify the role it can play in your retirement strategy. Once you have a strategy in place, you will better be able to enjoy your retirement years, without worrying about the next paycheck.
Nutting, CLTC, a financial associate with Thrivent Financial in Southern Pines, can reached at 910-692-5570 or firstname.lastname@example.org