Determining The Best Strategy For Claiming Social Security Could Result In Additional Retirement Income For Life!

What is Social Security?

Social Security provides lifetime, inflation adjusted income during retirement. It was first signed into law in 1935 by President Roosevelt. Social Security maybe one of your largest sources of income during retirement. According to the Social Security Administration, Social Security provides approximately 40%  of an average wage earner’s income after retiring.  Social Security may be an important piece of your retirement plan and should be thoughtfully coordinately between your other retirement assets.
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When Can I Start Social Security?

Your full Social Security benefit is available at your Full Retirement Age. If you would like to elect prior to your Full Retirement Age, you may take a penalty off your benefit amount and start as early as 62. If you would like to elect past your Full Retirement Age, you can receive a bonus by electing as late as 70. You can elect at any month between age 62 and 70! Determining the best time to start Social Security is a very important decision – it’s important to weigh all of your options and see which is best for your situation.

How Much Will I Receive?

Your Social Security benefit is based off your Primary Insurance Amount (PIA). Your PIA is the amount you would receive at your Full Retirement Age. It is based off of your highest 35 years of employment, indexed to today’s dollars and then averaged. If you elect prior to your Full Retirement Age, you will receive less than your PIA. If you elect after your Full Retirement Age, you will receive more than your PIA.

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Have you thought about how long you may live in retirement?

When Social Security was founded in 1935, the life expectancy of a man and female was 58 and 62, respectively. Times have changed and today people are living longer and longer. This means that it is more important than ever for your money to last. Making sure to maximize your Social Security Benefit is critical.
Today, a male age 65 has a 50% chance to live to 85 and a 25% chance to live to 92. A female, aged 65 has a 50% chance to live to 88 and a 25% chance to live to 94. When you are married, statistics get interesting for the surviving spouse.

The odds on how long a surviving spouse will live in a couple.

50% chance one spouse will live until:

AGE 92

25% chance one spouse will live until:

AGE 97

There is a good chance you could be collecting Social Security for 30 years!

This may be one of the biggest financial decisions you will make. Understand your options and how they fit into your retirement plan.

Delaying Social Security & Coordinating Your Benefits With Your Spouse May Significantly BOOST your income.

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You already knew that by delaying Social Security your benefit amount would increase, but did you know that the increase was approximately 8% per year!? Remember, that is a guaranteed 8%, which is very powerful in today’s economy.

With combination of life expectancy continuing to rise and a guaranteed annual 8% increase in Social Security benefits, for many people delaying Social Security maybe the best option.

How It Works With Real Numbers

Let’s assume your full retirement age benefits is $2,500 per month. If you were to elect early at 62, your benefit would drop to only $2,000 per month. That’s a difference of $6,000 dollars each year! If you lived to age 90, you would be giving up almost $90,000 dollars over the course of your lifetime, just by electing at age 62 rather than 66. Even just living to age 80, the loss of income is still almost $15,000 dollars. And we still haven’t discussed coordinating benefits with your spouse to increase your benefit even more!

DON’T AUTOMATICALLY THINK THAT ELECTING SOCIAL SECURITY EARLY IS YOUR BEST DECISION

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More Lifetime Income Electing at Age 66 vs. Age 62
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More Lifetime Income Electing at Age 70 vs. 62
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Annual Increase in Benefits for Each Year You Delay
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Average Cost of Living Adjustment Since 1975

Have You Thought About How Social Security Will Effect Your Taxes?

Watch This Video To Learn

Want To Get The Most From Social Security?

You Need To Work With A Retirement Income Planner That Specializes In Coordinating Social Security With Your Other Retirement Pieces.

When people make their Social Security election decision in isolation, far too often they end up making a mistake, and often it’s a big mistake. Coordinating your decision with your retirement puzzle can help eliminate those mistakes. When you leverage your Social Security decision with other assets you have, as discussed in the video above, you may be able to minimize taxation and maximize guaranteed, lifetime income from Social Security! This is a big deal!

It’s critical to work with an advisor that doesn’t just understand Social Security, but also understands how to most efficiently coordinate that decision by considering tax strategies, your estate, and other assets.

Remember, once you elect Social Security, it’s permanent.

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These Case Studies Show The Value Of Getting The Most Out Of Social Security

John, 66 and Laura, 64 (Married)

Retirement is right around the corner for John and Laura. Instead of taking Social Security early at 62 they have delayed a few years to grow their benefit and now would like to elect. John is the primary earner and Laura is the secondary earner.

They went to the Social Security office and got their benefits. John, could file a standard application at age 66 and receive $2,013 per month and Laura could file at the same time at her age 64 and receive $436 per month. This would allow them to collect $579,131 over the course of their expected lifetime.

However, with a little bit of planning they can greatly increase their benefits. We taught John and Laura about a strategy called file and suspend. The outcome significantly helped boost their retirement income during the rest of their life!

Here’s their maximized Social Security strategy:

John will file a standard application at age 68 and immediately suspend his benefits. This will allow Laura to collect spousal benefits and let John’s benefit grows. Laura will file at age 66 and receive $1,040 per month as a spousal benefit. Then, when John turn’s 70, he will request his benefits to be paid which will be $2,857 per month. This strategy provides an additional spousal benefit for Laura and increases the survivor benefit! Over the same expected lifetime, they will collect $698,251!

Initial Strategy: $579,131

Maximized Strategy: $698,251

Strategy Gain: $119,120

 * based off 2% inflation and 2% total return

This example is hypothetical and implementing this strategy may not result in the same results. Individual results and available strategies may vary.

Jack, 62 and Susan, 58 (Married)

Jack and Susan have both spent a majority of their time in the work force and are blessed to each have a pension when they retire. They feel secure in how much they have saved for retirement and consider Social Security to be “icing on the cake.”

Because they can afford to retire, they are planning on electing Social Security at age 62 for both of them. With this strategy, over the course of their expected lifetime, they will collect a total of $924,616.31.

With this strategy, Jack and Susan are missing out on a lot of money. After meeting with us, they learned about the power of a restricted application and quickly realized they could be getting a lot more!

Here’s their maximized Social Security strategy:

Jack will wait and file for benefits at age 70. This allows his benefit to grow and Susan to collect a spousal benefit. Jack’s monthly benefit at age 70 is $3,312. When Susan turns 66, she will file a restricted application for only her spousal benefit’s based off of Jack’s earnings record. She will start collecting $1,254 per month, and let her benefit continue to growth. Then when Susan turns 70, she will switch over and start collecting her own benefit of $2,621 per month. Over the same life expectancy, they will collect $1,135,869!

Initial Strategy: $924,616

Maximized Strategy: $1,135,869

Strategy Gain: $211,253

 * based off 2% inflation and 2% total return

This example is hypothetical and implementing this strategy may not result in the same results. Individual results and available strategies may vary.

Debbie, 65 (Divorced)

Debbie has been a school teacher during her entire working years, she was married for 17 years and has been divorced for the last 7 years. Debbie has been planning on retiring from her job and collecting social security at her full retirement age of 66. She is excited to start her new chapter of life!

She went in to the social security office and learned that her monthly benefit would $1,394 when she retired at age 66. Assuming a life expectancy of 88 years she would collect $298,361 from social security over the course of her life!

However, Debbie learned that she is missing out on some valuable benefits that she could receive. After meeting with us, she learned that she could receive benefits based off her ex-spouse’s earning record.

Here’s her maximized Social Security strategy:

At age 66, instead of electing her social security benefit, she will file a restricted application and claim her ex-spousal benefit of $1,192 and let her benefit continue to grow at 8% per year. Then at her age 70, she will switch over to her own benefit and start collecting $2,031 per month. Over the same life expectancy of 88 years, she will now collect $393,113!

Initial Strategy: $298,361

Maximized Strategy: $393,113

Strategy Gain: $94,752

 * based off 2% inflation and 2% total return

This example is hypothetical and implementing this strategy may not result in the same results. Individual results and available strategies may vary.

Upon request, we would be happy to send you a helpful Social Security article from the Society of Actuaries, “Deciding When to Claim Social Security”

 

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LifePlan Group
8341 Bandford Way, Suite 107
Raleigh, NC 27615

Phone: 919.858.6119
email: contact@lifeplangroup.com

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