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6 Things You Need to Know Before Taking Social Security

6 Things You Need to Know Before Taking Social Security

Originally aired 4/7/2021

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Social Security is foundational to your retirement plan, but it can be confusing. On this episode of the Get Ready For The Future Show, the dream team is joined by Mary Beth Franklin, nationally recognized Social Security Specialist and contributing author for InvestmentNews. 

You’ll learn:
– 6 things you need to know before taking Social Security
– Valuable insight from Mary Beth Franklin
– One important question to ask before you retire

Downloadable Content:

Links:

Register Here For Outlook: 2021 Webinar

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SHOW NOTES

 Age is Nothing but a Number… (well, kind of)

  • Social Security is foundational to retirement planning. But with about 2,700 rules that govern Social Security, it can be confusing!
    • How can you be sure you’re maximizing your benefit?
  • #1 – What’s your full retirement age?
    • 2021 is the year Social Security changes forever!
      • The full retirement age is going up
        • It used to be 66
        • It’s climbing now by 2-month increments until it reaches 67
  • #2 – How will the age you take benefits affect your eventual monthly payout?
    • You can file for Social Security as early as 62
      • With FRA at 66, you would receive 75% of your benefit
      • As FRA climbs, you will only receive 70% of your benefit
    • If you delay until 70
      • With FRA at 66, you would have been able to receive 132% of your benefit
      • As FRA climbs, you will only receive 124% of your benefit
    • On average, benefits increase by around 8% for every year that you wait, with those increases stopping once you reach age 70.
      • However, waiting until age 70 isn’t necessarily the best option for everyone.

Interview: Mary Beth Franklin

  • Joining us today is Mary Beth Franklin, Social Security Specialist and Contributing Editor for InvestmentNews.
    • Mary Beth, how are you?
    • About a year ago, you wrote a column at the start of the Coronavirus outbreak that predicted a worsening of the status of Social Security as a result of the pandemic. Now that we have passed the one-year mark, how has the system faired?
    • President Biden has touted a number of big changes to social security, such as a guaranteed minimum benefit of at least 125% of the Federal poverty level, a 5% bump in benefits for those who have drawn for over 20 years, and 20% more per month for widow and widowers. He would also change the inflation factor applied to benefits to make them more closely track the expenses retirees face.  What are your thoughts on those changes?
    • The President has also proposed a benefit to Social Security by raising income taxes on those making over $400,000, imposing a 12.4% tax. What would that do to the previous funding situation that was happening prior to COVID and will it be enough to pay for all the changes he wants to make as well?
    • With all that is on the plates of Congress and the President, is there any hope in your mind of seeing any substantive changes on the Social Security front anytime soon?
    • Would you speak to the importance of someone examining their Social Security claiming strategy in light of all the other things like IRAs, 401k, and pensions in retirement?

Have You Thought About…

  • #3 – Are you healthy?
    • The next consideration to be made is whether you’re in good health and expect to live a longer-than-average life.
      • For context, the average life expectancy in the U.S. is nearly 79 years, and it’s risen nine years since the mid-1960s.
    • If you aren’t in the best of health, then taking benefits sooner to realize the advantage of extra income might be in your best interest.
      • If you’re an otherwise healthy individual with a family history of longevity, then it could be worthwhile to allow your benefits to grow by waiting to file.
    • Right around age 80 tends to be the inflection point at which the lifetime benefits of a retiree who filed at age 62 and a retiree who filed at age 70, with similar income, have received a relatively equal cumulative payout.
      • If you expect to make it well past age 80, waiting until your FRA or later is often going to net you the most from the program.
  • #4 – Do you have a spouse to consider?
    • You’ll also want to coordinate your claiming decisions with your spouse, should you have one.
      • For example, married couples where one partner has a considerably higher lifetime income than the other can work together to get the most out of their Social Security benefits.
      • In order to generate some income during the early years of retirement, the lower-earning spouse can file for benefits. Meanwhile, the higher-earning spouse can allow their benefit to grow, since an extra 8% per year on a larger benefit will have a bigger impact on the cumulative benefit for the couple during retirement than if the lower-earning spouse had waited.
    • Furthermore, your claiming decision could impact the survivor or spousal benefit your partner receives.
  • #5 – Is your earnings history correct?
    • Here’s the good news: Mistakes to your earnings history, which is used to calculate your benefit, aren’t too common.
    • The bad news is the chance of an earnings mistake does exist, and it’s enough to merit you closely examining your wage history before you begin taking Social Security benefits.
      • “An earnings record can be corrected at any time up to three years, three months, and 15 days after the year in which the wages were paid or the self-employment income was derived.”
        • If you don’t believe us that Social Security is complex, take this as an example. It would be easier to just say 3 years.
      • There are a few exceptions to this time limit, such as to correct fraud, or a clerical error made by the SSA itself, for example.
    • Now, back to the good news: You can check your earnings history with ease by creating a My Social Security account online.
  • WEBINAR: How to Reduce Taxes Before Retirement
    • Thursday, April 22nd
    • 6:30pm
    • Click here to register!

Extra, Extra! (Bonus Question Coming In Hot)

  • #6 – Are you eligible for additional benefits beyond those based on your own work history?
    • Find out if there are alternative pathways to a higher Social Security benefit available.
      • This is particularly helpful to spouses who’ve had a shorter career because they’ve taken care of their kids or acted as a caregiver to a friend or parent.
    • For instance, if you’re married or you were married for at least 10 years before getting divorced, you may be eligible to receive up to 50% of your spouse’s benefits based on their earnings history.
      • This is especially helpful if you’re the lower-earning spouse and the spousal benefit would be higher than your own benefit based on your work history.
      • Spousal benefits are based on the monthly payout of when the higher-earning spouse or ex-spouse files for benefits. So, as we mentioned earlier, when you start benefits (before or after your FRA) can have far-reaching implications beyond just what you’ll personally be paid.
    • Also, the surviving spouse (and ex-spouse for marriages lasting at least 10 years) benefit in instances where the breadwinning spouse passes away first can be up to 100% of the benefit received by the higher-earning spouse.
      • In other words, lower-earning beneficiaries may have alternate claiming options that boost their income in retirement.
  • BONUS QUESTION – What’s the Plan?
    • While Social Security is foundational, it’s just one piece of the puzzle.
      • It’s not enough on its own.
    • You need a comprehensive plan. One that focuses on your needs and desires in retirement.
    • Gap Analysis
    • Click here to get started on your personalized plan on paper, on purpose.

FINAL THOUGHTS

    • Social Security is foundational to retirement planning, but it can be confusing.
      • You need to know these things before claiming:
        • What’s your full retirement age?
        • How will the age you take benefits affect your eventual monthly payout?
        • Are you healthy?
        • Do you have a spouse to consider?
        • Is your earnings history correct?
        • Are you eligible for additional benefits beyond those based on your own work history?
        • What’s the plan? 
  •  
    • WEBINAR: How to Reduce Taxes Before Retirement
      • Thursday, April 22nd
      • 6:30pm
      • Click here to register!
  •  
    • Got questions? We want to hear them!
      • On the next episode of the Get Ready For The Future Show, we’re answering your questions about retirement, investments, and your money. It’s Ask Us Anything part 2!
      • Text us at 501.381.5228, email us at info@getreadyforthefuture.com or chat with us on social media!