Savvy Social Security Planning

“Often when you think you’re at the end of something, you’re at the beginning of something else.”

~Fred Rogers (1928-2003), also known as Mister Rogers. 

Question: What are your suggestions for ways we can maximize our Social Security benefits as we incorporate them into our plan for retirement? 

Answer: In any financially independent retirement, Social Security is bound to be an essential factor. There at not many sources of income that provide the cash flow and cost-of-living increases just about every year. Social Security benefits are a source of income that will hold relatively steady in just about any market environment. Its resilience is just one of many reasons you’ll want to be as informed and astute as possible about your Social Security benefits strategy.

Here are a few ways you may be able to help maximize your benefits.

It’s not just about you

Your Social Security decisions should be made in tandem with your spouse, not as two independent decisions. Strategizing with each other and your advisor is the key to maximizing your overall household benefits. Remember that Social Security offers spousal and survivor benefits as well as cost-of-living increases, so making the most of this important pillar of retirement income may serve you both well in the long run.

The ex-factor

Many divorced people erroneously think that filing on their ex’s record somehow takes benefits away from their former spouse or even alerts them to the claim. That’s not the case. If you were married for at least 10 years and haven’t remarried, Social Security allows you to claim spousal benefits for yourself, and your ex would be none the wiser. For example, women who stayed out of the workforce to serve as family caregivers may find that their spousal benefits would actually be larger than claiming on their own record. Basically, they could be entitled to an increased benefit without detracting in any way from their ex’s benefits – certainly, something to consider. Why leave money on the table? There are even some scenarios where you can collect on your ex’s record first, while deferring your own.

Remarriage implications

Remember the rules above? Getting remarried will cut off those spousal benefits from your ex’s record. This may be fine if your new spouse made a higher lifetime income, but it’s worth thinking through either way.

The fashionably late arrival

For many of us, waiting until full retirement age (FRA) may significantly increase lifetime benefits. People who claim at age 70 versus age 62 receive 76% more in benefits – that’s quite a pay raise as a tradeoff for a little patience.

Of course, if you have a family history of illness, shortened life expectancy or an immediate need for extra cash flow, this may not make the most sense for you. But if you have a solid nest egg, it could pay to delay. Consider too that permanently reduced benefits not only affect your finances over what could be a 30-year retirement, but your spouse’s, too.

The bird’s eye view

Smart investors, in general, look at their financial plan holistically, not in isolation or compartments. That goes for any decisions around Social Security. Benefits are best viewed in light of the role they’ll play within your overall portfolio, in conjunction with other retirement income and in order to make progress toward your short-, mid- and long-term goals.

How working works

Working while withdrawing before full retirement age (FRA) comes with some funky math. The Social Security Administration (SSA) temporarily withholds $1 in benefits for every $2 you earn above the current $18,960 limit. In the year you reach full retirement age (FRA), SSA will deduct $1 from your benefits for every $3 you earn above an established threshold, currently $50,520 for 2021. Once you reach full retirement age, your earnings no longer reduce your benefits, no matter how much you make, and the agency recalculates your benefits to give you credit for the months it withheld payment due to those excess earnings.

The value of keeping track

Even if you’re decades away from retirement, create a secure login to access your personal Social Security account at ssa.gov. Doing so may help stave off identity theft and catch any mistakes in your earnings history. This is an action you can take today. We’re happy to help by running goal planning models for you with various strategies. Stay focused and plan accordingly. 

The opinions expressed are those of the writer as of June 14, 2021, but not necessarily those of Raymond James and Associates, and subject to change at any time. Information contained in this report was received from sources believed to be reliable, but accuracy is not guaranteed.  Prior to making an investment decision, please consult with your financial advisor about your individual situation. Past performance does not guarantee future results. Economic and market conditions are subject to change. The Consumer Price Index is a measure of inflation compiled by the U.S. Bureau of Labor Studies. Raymond James does not provide advice on tax, legal or mortgage issues. These matters should be discussed with the appropriate professional. 

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This article provided by Darcie Guerin, CFP®, First Vice President, Investments & Branch Manager of Raymond James & Associates, Inc. Member New York Stock Exchange/SIPC 606 Bald Eagle Dr. Suite 401, Marco Island, FL 34145. She may be reached at (239)389-1041, email darcie.guerin@raymondjames.com Website: www.raymondjames.com/Darcie.