Don’t Ignore Social Security

It is so easy to ignore that what we do not believe in.  Should Social Security fall into this category?  See, we are told it is broken.  We are told that it will not be there when we need it.  The news is so depressing about Social Security that it is easier to ignore or forget it than worry about what it will be for many people.

That is a “Loser’s” decision

We cannot afford to ignore something that is critical to our financial success.  The majority of people in this country retire with inadequate resources.  Enough pennies picked up equal dollars.  Enough dollars equal a quality life.  So I think we should start picking pennies up today in as many ways as we can.  Do you understand the choices of Social Security?  Have you been told how to maximize your benefits?  The following questions should be asked when we are considering Social Security benefits.

1. When should I take them?
2. What are my options?
3. Do my spouse’s options affect my benefits?
4. Does my ex-spouse affect how much I get?
5. As a widow are my benefits the same and do I collect at the same time?
6. Is the maximum benefit always the best benefit?

So I think we need to go back and discuss each one of these.  Of course there is much more complication and discussion that goes into this.  But this is a beginning point.

1. So when should we take benefits?  Well I think that depends on your financial DNA.  You cannot pretend to make the best decisions about your retirement plans if you have not done a financial plan, a road map of sorts to help you make the best decisions on your path to the rest of your life.  There are so many options with so many different places to take money.  Which resource should we draw from first?

• IRAs
• pensions
• taxable accounts
• 401(k)s
• Social Security
• spousal assets, or ours?

There is no right or wrong about this decision, only how we maximize benefits.  We need to build a plan so we can stress test our assets and see long-term how they respond to different decisions.

2. Your option is to take:

• your earliest benefits at age 62
• full retirement benefits at 65 to age 67
• maximum benefits at age 70

For most of you if you’re going to live past age 80 (which many healthy people at 65 will) you will get the most benefits by taking at age 70.

3. Your spouse’s benefits definitely affect what the two of you can get from Social Security as the maximum benefit. In fact if you have the choice it can be a substantial advantage to plan your income to maximize your Social Security benefits.

4. If you have been married to someone for longer than 10 years prior to divorce their benefits may be worth more than your own benefits.

5. As a widow you can collect earlier and have more layers of options in the future for income choices.  So prior to age 60 we need to be making decisions on how we will take benefits.

6. For many people taking your benefits at age 70 will give you the most cash flow from Social Security over your lifetime.  But this means we are spending out of our own benefits or other resources.  What I find with many people is if we do a stress test on their plan is is actually better to take benefits earlier even though we get less out of social security.

Of course all this depends on your circumstances, spouses’ benefits, ex-spouse benefits, your health and your other financial resources.

So maybe it takes the wisdom of Solomon!

Or maybe it just takes good planning.  In my book “The Truth Project: Finding the Courage to Ignore Wall Street” take a look at the discussion about the Myths and Truths of planning.

Pennies=Dollars=Choices

Sincerely,

Wayne von Borstel, CLU, ChFC, CFP®, MSFS
Personal Financial Advocate