Written By: Shawn Perkins, CFP®, AWMA®

A quick refresh on Social Security.  During your working years, you’ve accrued credits and contributed towards Social Security through your payroll taxes so that once you’re eligible you can begin a guaranteed income stream that lasts the remainder of your life.  The earliest you can tap into your benefit is age 62.  However, by doing so your benefit is reduced from what it could have been had you waited until your Full Retirement Age, which is the age you would receive your unreduced benefit based on a record of your employment income.  Your Full Retirement Age is based on when you were born, and for anyone born in 1960 or later, your Full Retirement Age is 67.  So, if your Full Retirement Age is 67 and you file at age 62, you can expect a 30% reduction in your benefits for filing early.  On the other hand, your benefit increases 8% per year every year you delay your Social Security past your Full Retirement Age, up to age 70.  In other words, with a Full Retirement Age of 67 and delaying to age 70, you could expect a 24% increase in your benefit.

Does it make sense to delay your benefit?  In a recent studied conducted by The National Bureau of Economic Research, researchers found that over 90% of Americans should wait until age 70 to file for their Social Security benefit, but that only 10% actually do so.  By not optimizing, they say, workers had a median loss of $182,370 in discretionary income over their lifespan. [1]

I don’t disagree with the research cited above.  I believe if you have the capability to delay your benefit, then it makes mathematical sense to delay for as long as you can to maximize your payout.  However, the reality is not so black and white.  There are a myriad of variables to consider in making the decision to file.  For example, do you have longevity in your family or are you in good health overall?  If not, perhaps waiting may not be the best strategy.  What about tax planning?  Does it make sense to delay Social Security to take advantage of other tax opportunities such as Roth conversions or spending down tax-deferred accounts?  If you’re thinking about taking your benefits early, are you still planning to work?  If so, then depending on your income you may be over the earnings limit and your benefit will be withheld.  Lastly, let’s not forget about your investment planning.  Does taking income from Social Security versus your investment portfolio put you in a better position for long-term growth and success?  And if you’re married, we haven’t even begun to talk about spousal benefits and the strategy behind making sure your surviving spouse has enough income to continue living comfortably should anything happen to you. 

As you can see, arriving at strategy for Social Security seems daunting.  That’s where we want to help.  By using our cash flow plan, we are able to run a variety of what-if scenarios to arrive at a strategy together that is best suited for you.  Let’s make an educated, well-thought-out approach that eases your concerns and satisfies your needs within our EPIC5i™ framework.

Say What?

A Pennsylvania chocolate factory owned by Mars Wrigley was fined over $14,000 when two workers fell into a vat of chocolate and had to be rescued. The two contractors were hired to help clean the tank that was used to mix chocolate for Dove chocolate bars. 

This week in history

1922 – The US Supreme Court defends women’s voting rights by declaring the 19^th amendment to be constitutional. 

1962 – Wilt Chamberlain scores 100 points for the Philadelphia Warriors in a 169-147 win over the New York Knicks. 

1983 – The final episode of M*A*S*H aired.

2014 – In February and March 2014, Russia invaded Ukraine and start the process to annex the Crimean Peninsula. 

[1]https://www.nber.org/papers/w30675

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