Let’s cut to the chase: When should you really apply for Social Security?
It’s something we get asked every day.
That’s because Social Security is not only complicated, if you listen to the news, you’ve probably heard that changes to the financially-strapped program are inevitable.
From smaller benefits, to “means testing,” to raising the retirement age, changes could include just about anything and they might be implemented at any time.
But don’t worry too much. Just make sure you get enough information so that you know the best decision for your situation.
We’re going to simplify it for you.
Consider the following:
Your age matters.
Here’s what you should know about when other people claim Social Security:
Some pre-retirees calculate their “Social Security break-even point” to help them decide when to claim. But what is it?
The ‘break-even’ point is the age at which the amount you’ll receive by claiming later (because your monthly benefit increases the longer you wait) surpasses the amount you’ll receive if you file and begin receiving benefits earlier.[ii]
Calculating a break-even point
Here’s a common social security situation. (We’ve rounded his numbers down just slightly for clarity.) Born in 1961, Charles is 58. At his Full Retirement Age (FRA) of 67, he’ll receive a benefit of $2,000 a month. Here’s how his monthly benefit amount changes depending on his age when he files:
Now, Charles has a choice to make: Should he claim early, or should he wait until age 70?
So, when Charles reaches age 62, assuming he lives to be 84 (which is the average lifespan for someone who is 62), he would earn more than $40,000 additional dollars by waiting to claim.[iii]
But these are just numbers.
And we understand that you are not a number.
We take your individual situation into consideration before we advise you about what to do.
It’s not only complex, but married couples need to be extra cautious about break-even points, because the repercussions of this decision increase two-fold. Couples need to make Social Security decisions with both people in mind, especially if one plans to claim off the other’s work record (claiming early can reduce a spousal benefit).
How to decide when to claim
The decision as to when to claim Social Security shouldn’t be made in a vacuum. And it’s certainly more involved than just calculating a break-even age.
You need to look at all your retirement savings, investments, and streams of income, then ask yourself some questions, including:
And let’s not forget about the solvency and legislative risks to Social Security. Depending on your situation and the amount of savings you have, these two risks could make it prudent to claim earlier – even if you don’t need the money.
While your break-even point is good to know, at the end of the day, when to claim is a complex process that needs to consider a bunch of variables before a final decision is made. Because remember: Once you apply, there’s no changing your mind.
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1The NBRI Circle of Excellence Award is bestowed upon NBRI clients meeting one or both of the following criteria: Total Company score at or above the 75th percentile of the NBRI ClearPath Benchmarking Database and/or improvement of five (5) or more benchmarking percentiles in Total Company score over the previous survey.
2Scott Hanson (2011, 2012, 2013, 2014, 2015 & 2016) and Pat McClain (2012, 2013, 2014, 2015 & 2016). Barron's© magazine is a trademark of Dow Jones L.P. The ranking reflects the volume of assets overseen by the advisors and their teams, revenues generated for the firms and the quality of the advisors' practices.
3As of 08/20, Allworth Financial, an SEC registered investment adviser and AW Securities, a registered broker/dealer have approximately $9 billion in total assets under management and administration.
4Barron’s 2020 Top 100 RIA Firms. Barron's© magazine is a trademark of Dow Jones L.P. The ranking reflects the volume of assets overseen by the advisors and their teams, revenues generated for the firms and the quality of the advisors' practices.
✢Scott Hanson, Investment Advisor 2005, 25 most influential people in the financial services industry. The ranking reflects 25 people who Investment Advisor magazine believes have had or will have the greatest influence on the financial services industry.
✼Pat McClain, InvestmentNews 2014, Invest in Others Community Service Award, presented to an advisor who has made an outstanding impact on a community through managerial contributions to a non-profit organization.
†Financial Times, FT 300 Top Registered Investment Advisers, June 2019. The ranking reflects six areas of consideration including the company's years in existence, industry certifications of key employees, AUM, asset growth, SEC compliance record and online accessibility and calculates a numeric score for each company.
Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.