Maximize Your Social Security Benefits

Consider delaying your social consider benefits. Here's why...

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Nearly 50% of all Americans file for benefits at age 62.

I believe people collecting at age 62 don’t understand their options and make decisions based on rumors or emotion. Some need income because of poor health and don’t think they’ll live long enough to benefit themselves or their family. For married couples, a simple break-even analysis is usually the wrong answer.

Generalizing SS strategies is challenging. Each spouse’s age, benefit amounts, and health outlook play a significant role in how and when to claim. The point is, don’t claim before you look at the multiple benefits and strategies. These strategies are available for married, single, widowed, government employees, and people that have already started benefits but are not 70 years old yet. Don’t be fooled into thinking SS is a “Slam Dunk!” Through 2728 separate rules and guidelines outlined in a 170 + page manual by the Social Security Administration, nine strategies include switch options, 81 yearly or 972 monthly age combinations, and 567 sets of calculations.

When you retire, your income stops, and you start living off the money you’ve saved. It would help if you maximized your Social Security benefits to put as little pressure on your retirement assets. Every dollar you increase your Social Security income means less money you’ll have to withdraw from your nest egg to maintain your lifestyle. When you elect to start your SS benefits, it could be the difference between tens of thousands if not a hundred thousand dollars or more in lifetime benefits, impacting your retirement lifestyle.

1. What’s the best option and time to elect Social Security benefits?

It depends on your situation. Income? Available assets.

2. Who will provide you with reliable advice for making these decisions?

Most people look to their financial advisors for SS claiming advice, but most financial advisors don’t understand SS’s complex rules or guidelines. People always tell me that their financial advisors tell them to call the Social Security Administration or start their benefits as soon as possible and invest the income, which could have significant risk.

3. Why not ask Social Security for advice?
SS representatives are prohibited from giving election advice and are not licensed to ask you about your retirement accounts or other assets or evaluate the impact of your decision on the rest of your financial plan. Plus, SS representatives, in general, are trained to focus on monthly benefit amounts for the individual, not lifetime income for the family. Taking SS benefits at the right time will be one of the biggest financial decisions you’ll ever make, so you need to get it right. Getting it right on your own is almost impossible.

4. Why is it important to use someone trained in SS timing?
Taking your SS benefits at the right time will have a lifetime impact and could make a massive difference to a retiree’s standard of living. It will affect your retirement and savings accounts. That’s why it’s imperative to coordinate the preservation and distribution of these accounts to delay your SS income and avoid paying excessive and unnecessary taxes. SS is taxed at a lower rate than your retirement accounts or any other income.

Managing the impact of taxes. As much as 85% of your benefits may be subject to income taxation. Nearly every source of income is included: wages, pensions, dividends, capital gains, business income, and tax-exempt interest. It’s important to time your SS benefits along with the withdrawals from your retirement accounts to reduce or eliminate unnecessary or excessive taxes. Forbes had an article in reference to SS “Secrets.” “When it comes to possibly pay federal income taxes on your Social Security benefits, withdrawals from Roth IRAs aren’t counted, but withdrawals from 401(k), 403(b), regular IRAs, and other tax-deferred accounts are.

So there may be a significant advantage in a) withdrawing from your tax-deferred accounts after you retire but before you start collecting Social Security,  b) using up your tax-deferred accounts before you withdraw from your Roth accounts, and c) converting your tax-deferred accounts to Roth IRA holdings after or even before you retire, but before you start collecting Social security.

6. How can you maximize your lifetime Social Security benefit?

This is not the government’s money. It’s your money that you’ve paid into the system for years. This is not Welfare or Food Stamps. You need to know the rules to maximize your SS benefits for yourself and your family. Get what you are owed!

7. Why should I delay my Social Security benefits?

From age 62 to 66, your benefits will increase by an average of 6.25% per year, and from age 66 to 70, it goes into supercharging mode at 8% per year plus Cost of Living Adjustment (COLA). Most people are unaware that married couples have strategies like restricting or filing and suspending their application available to them, leaving money on the table. These strategies have the potential to increase their lifetime benefits by tens of thousands if not a hundred thousand dollars or more.

8. What else is there to consider?

People learn to focus on tax-efficient ways to acquire assets; my responsibility is to find the most tax-efficient way to distribute your assets. Your SS may be taxed if you have a pension, depending on what state you live in could be taxed (like Michigan), and when you turn 72 1/2 you have Required Minimum Distribution (RMD), your retirement account is taxed.

The IRS has a plan for you; what’s your exit strategy? One simple approach is to provide more money for your retirement and less for the IRS. This requires a complete in-depth look at your overall financial situation and determining what assets should be planned for retirement, education, and other living expenses. 

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