For your entire working life, FICA (Federal Insurance Contributions Act) has been taken money out of your paycheck to pay for Social Security, and Medicare and our goal is to make sure you receive the maximum benefit. We create strategies for our clients to help them take advantage of the Social Security benefits throughout their life in retirement. Here are a couple quick tips for your Social Security Strategy to review:
1. Don’t claim Social security until you have run a Social Security optimization report on your situation.
Or at least talked with a knowledgeable advisor! You’ve likely been paying into Social Security for your entire working life, and deserve to earn the maximum legal benefit that you’re entitled to. Navigating Social Security can be a daunting task as rules change and benefits vary depending on a multitude of factors. Have your financial advisor run a Social Security optimization report and provide you with a plan for when to file, how to file, and what to expect based on your individualized circumstances.
2. If you were the higher earning spouse, and your spouse is expected to outlive you, consider delaying your Social Security benefits until age 70 if possible.
While it may be tempting to take your social security benefit when you turn 62, waiting to claim your benefit will likely pay off higher benefits in the long run. Not only will your benefits increase, but your spouse will also be entitled to 100% of your Social Security benefit should you predecease him/her. The surviving spouse will be glad you waited.
3. Understand the Social Security benefit formula as it relates to your individual situation.
Social Security pays you based on your highest 35 years of inflation-indexed earnings. If you have worked for less than 35 years, Social Security will mark the excess as zero in the average. It may be advantageous to work a few years longer if you are looking to increase your benefit as you could replace any of your lower income years in the Social Security equation with presumably higher earnings.
4. Base your Social Security start date on your tax plan:
When you should begin Social Security should fit your tax plan. Taking Social Security too early, may result in your Social Security Income being taxed throughout your lifetime, whereas a delay may allow you to eliminate all taxes on Social Security for life.
Remember that your goal is likely not to maximize the amount of Social Security you receive, but the amount of after-tax wealth you can spend and pass on. Social Security is just one component of your plan.