I’ve got baseball on the brain. ‘Tis the season for warmer weather with a cool breeze, cleaning out the garage, planting my garden and…baseball. I’ve also been doing a lot of talking and analysis on Social Security benefits. So, forgive the cheesy title, but I’m seeing a lot people falling for the curveballs and striking out on their Social Security election choices.
I think there’s a fair degree of misinformation about Social Security, and even worse, not a lot of effort put into helping Boomers make their choice. Be aware that the SSA, while extremely helpful, efficient and high-tech, cannot give you advice about when and how to claim. Who is asking the questions to help get a sense of the full picture, cause and effect, goals and priorities? If you don’t have a planner helping drive these conversations, get one! The difference in choice can be major bucks over your lifetime. The reality is that most Americans do not know that there are smart and not-so-smart ways to take Social Security and that the decision is irrevocable.
So, here’s my 60 second commercial on Social Security with a consumer-friendly message of warning. It goes something like this:
- Don’t swing at the first pitch: At age 62, with enough work history, you qualify for benefits. Congratulations! Don’t just step to the plate and swing at the first pitch though. Are you aware of how much you are forfeiting in benefits by not waiting until you reach your full retirement age (FRA), say age 66? The answer is approximately 30 percent. And if you wait an additional four years till age 70, your benefit would be 62 percent higher than what you will get now at age 62. Make sure you have done some financial planning to account for your health, family longevity and other resources before automatically signing up the minute you are eligible.
- Look at a couple different pitches to see which you can hit: Are you married? If yes, that fact alone opens up all sorts of possibilities for coordinating your claim with your spouse including potentially higher benefits via a spousal election. The “best” strategy may depend on the difference between your ages and the amount each spouse would collect on his or her own record, as well as the couple’s basic financial and health circumstances.
- Don’t zero in on one pitch. If you are single and divorced but were once married for over 10 years, you may still have the opportunity to make a claim based on your former spouse’s record. If you are widowed, widowed and remarried after age 60, disabled, and/or have a disabled spouse, there are even more possible strategies for claiming benefits. Don’t just look at your own benefit when there may be other options.
- The curveball is coming: If you claim before your full retirement age and continue to earn, you may have to actually pay some of your benefit back. More and more of my clients work in some capacity after “retiring.” That may mean you should wait to elect.
- Be patient. It’s ok to take a base on balls: Social Security takes your 35 highest years of earnings. So, if you work, even part-time, those earnings may replace your earnings from 35 years ago and therefore do two things; increase your average benefit base, and also increase your payout by delaying your election.
Sound complicated? Hire a hitting coach, otherwise known as a CFP® professional who can look at your whole financial picture, and who has the knowledge or experience and specialized software to help you make a good decision. That’s how you hit a home run with Social Security, knowing what’s best for you, not chasing the fireworks.
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