Month: November 2024

It’s your very last chance to see her sing and dance through all of the eras.

In retirement planning, one of the most common questions we have to answer is the one above, helping people determine what is the best time to elect taking Social Security income.

This choice can be even more complicated for women who are widows or divorcees and who anticipate receiving Social Security based on their former spouse’s benefit.

Starting Social Security income first is often seen as a smart way to safeguard IRA savings. However, is it always that simple?

The answer to the above question is a very important one that has financial implications for the remainder of your life. Let’s explore some key considerations to help you develop a financial strategy tailored to your unique circumstances.

How Timing Affects Social Security Benefits

For the majority of people, Social Security income won’t cover their full expenses in retirement. This being so, the remainder of the money that will be needed to meet expenses in retirement will need to come from other sources – savings and retirement investments. In these cases, you’ll need both your investments and your Social Security income to work together for the remainder of your lifetime to meet your needs.

These two elements work together to create your full retirement income strategy.

How Should You Determine the Best Time to Start Your Social Security Income?

But how should you time triggering your SS income? The answer is: it depends on your specific situation. You can begin receiving your Social Security benefits at age 62, however that comes with a significantly reduced rate in comparison with delaying these payments. If you’re able to delay these payments past your full retirement age (FRA), which, for most, will be within age 66-67, then that income amount will continue to grow until age 70.

For this reason, delaying is often the preferred choice. Each year you wait, your income benefit increases by about 8%, which, if you live a relatively long life, can really add up.

We know that not everyone has the means to delay their Social Security income until their latest filing age, age 70. However, it’s still beneficial to consider the effects on your short-term and long-term Social Security income by taking it sooner or later.

The Social Security Breakeven Point

An optimized retirement income strategy is one where you are able to experience the highest total lifetime SS benefit. This is where the breakeven point comes into play. What is the breakeven point? Here’s a hypothetical situation to answer that question.

Example: Life Expectancy 82 Years

Let’s say you’re nearing age 62 and considering when to trigger your SS benefits. At age 62, your SS benefit will be $1,600 per month. At your FRA, age 67, your benefit will be $2,300 per month. At your latest filing age, 70, your monthly benefit will be $2,950. So the monthly income amount – that’s one factor.

Now the other factor to consider with the breakeven point – your life expectancy. Let’s say your life expectancy is age 82. Now some quick math will tell us when your breakeven point will be and thus what strategy will project the highest lifetime SS benefit.

●            If SS elected at age 62: $384,000 lifetime SS income (12 months*20 years of remaining life expectancy*$1,600 monthly SS benefit at age 62)

●            If SS elected at FRA (67): $414,000 lifetime SS income (12 months*15 years of remaining life expectancy*$2,300 monthly SS benefit at age 67)

●            If SS elected at latest filing age (70): $424,800 lifetime SS income (12 months*12 years of remaining life expectancy*$2,950 monthly SS benefit at age 70)

Example: Life Expectancy 77 Years

We can see here that in this situation, in order to achieve the highest lifetime benefit possible from Social Security, delaying until age 70 is the preferred choice. Now, let’s use the same respective SS income amounts per age elected, but drop the life expectancy by 5 years. How does this affect your lifetime benefit amount? The same math reveals:

●            If SS elected at age 62: $288,000 lifetime SS income

●            If SS elected at FRA (67): $276,000 lifetime SS income

●            If SS elected at latest filing age (70): $247,800 lifetime SS income

By simply dropping the life expectancy of the person in this hypothetical scenario by 5 years, we see a very different result in total lifetime Social Security income. We can see that in this case, the breakeven point falls before age 70 and even full retirement age 67. Rather, the strategy that gets you the most bang for the buck over your lifetime would be electing Social Security closer to age 62.

This scenario illustrates that the highest monthly amount and the highest lifetime amount of Social Security income are often two very different things. If you’re interested in preserving as much of your own hard-earned IRA (or other) savings and investments as possible, and if you’ll be relying on some of those savings over the course of your retirement life as well, the strategy that’s best for you may very likely involve figuring out how to maximize your lifetime Social Security benefits.

How Personal Factors Affect Social Security Timing

As we can see above, the breakeven point is extremely important in timing your SS. However, it’s also based on something unknown – your life expectancy. Therefore, an important question to consider is how should you gauge where your breakeven point will fall in your lifetime? This is where the personal factors come into play. Here are a few personal factors to consider:

Health

Do your habits and family health history lend themselves to longevity? If so, then you’re more likely able to project a longer life expectancy and so delaying Social Security income may be the wiser choice. However, if health issues due to lifestyle, family history, or other factors are a major concern, electing these benefits earlier may make more sense for you.

Retirement Lifestyle

What are your personal goals and plans in retirement? Do they involve a higher measure of spending in your earlier retirement years, perhaps for travel or other hobbies? If so, you may simply elect to draw Social Security earlier to supplement your IRA withdrawals. However, with the lower monthly SS benefit and quicker drain on your retirement savings, you may have to make drastic lifestyle changes in your latter retirement years to compensate for this higher spending and lower lifetime SS income.

Marital Status

If you’re married and you are the higher earner in the household, delaying Social Security income can increase the survivor benefit your spouse would receive in the case of your passing. This could be especially important if other income sources will disappear or be reduced in the case of your passing, such as a pension or small amount of earned income.

A careful consideration of these factors as it relates to your personal circumstances, along with your own personal preferences can help you to make an informed decision.

Social Security – A Cog in a Larger Machine

By making an educated decision regarding Social Security based on your own personal circumstances, you’ll put yourself in a position to maximize your lifetime income benefit, and thus enjoy an optimized Social Security strategy.

This article details just one of the factors to consider as it relates to electing Social Security – timing. However, there are other factors to consider, such as how Social Security income combined with IRA withdrawals will affect your retirement taxation. This is why an optimized SS strategy is just one element of a larger strategy. This larger strategy is what makes up your retirement plan.

If you’d like to find out your optimized Social Security strategy and how it should best fit into your retirement plan, CLICK HERE to speak to one of our experienced advisors. We’ll review your financial situation and provide clear, tailored guidance on whether delaying SS or taking it sooner is the best choice based on your financial position, age, and personal goals.

Let’s Have a Conversation:

At what age did you claim Social Security? If you haven’t done so yet, what age are you looking toward for claiming your benefit? How did you decide the best age for your circumstances? What other questions do you have regarding Social Security?

Prices are dropping as we speak!

That’s nearly half the going price.

This year has been my wake-up call. Always in good health, I was blindsided by a series of health issues. In 2024, I found myself visiting doctors, undergoing countless tests, taking medications not previously needed, and a short hospitalization for a life-threatening condition. Today, I’m grateful to have healed from each event. In reflection, I used different approaches to manage the emotional reactions to each health issue.

At First, Denial Felt Safer

First, I shifted into neutral. In neutral, I avoided facing my feelings about the situation. If I did take a quick peek at them, I’d push them aside, going on with my life as if nothing had changed. This way of coping is a form of denial. Living as if a health concern is not there is tempting. Fear is real and looms large when we face a changing (and challenging) health status.

Questions of how this will look in the future are unanswerable and occupy unrelenting pressure in our thoughts. For me, denial felt safer. Lots of people live here. In this state of mind, you avoid going to the doctor for fear of bad news. You may refuse medical follow ups, or even stop taking medications. I lived comfortably in denial, until I couldn’t anymore.

And of Course, I Could Overreact

In this mode, I’d find myself telling anyone who would listen about my latest health issue. It wasn’t about seeking solutions, it was about releasing pressure that had built up inside. With worry always at the top of my mind, it felt right to talk it out.

Many older adults live in this mode. Have you met them? As soon as health issues become a topic of conversation, they are down the rabbit hole of giving much more information than the other party is even remotely interested in.

The opposite could also happen to where embarrassment about a condition causes isolation to avoid explanations. Rumination lives in this overreacting mode, causing worry to run rampant. Feelings of being out of control produce sleepless nights and bad moods.

Worry loves the overreacting state as it gets to have its moment of reign over your thoughts. It gets to talk in your head, and to anyone else around, about how bad everything is. Overreacting is a full out pity party, and it loves every minute of it.

Steady and Calm Mode Is Where I’d Ideally Like to Stay

Here, I take in the information, then sort through it calmly with clarity. It’s not about squashing the fear of the health issue; it’s about managing it with purpose. I wish I lived in this mode more often. I can get there, but it requires effort. Once there, I’m happier. I feel like I’m still in charge of me and reassure myself that I’ll manage everything as best I can.

It’s About Balance – Again

My dear friend has lived with chronic pain for years. I asked her to share how she manages to stay engaged in life, laugh through her struggles and find joy despite the pain. I’ve curiously observed her laughing with her husband, enjoying light entertaining, and discussing the latest online class she’s taking. Her secret? She shifts between all three modes mentioned above. Let’s get real. We do all of them. The balance of the three is where she lives, setting an admirable goal for me to attain.

Feeling Bad Can Be Strategic

My friend allows herself to feel bad sometimes. She will sit in it and let crummy feelings be there. This makes more sense to me. Constantly working at squashing overwhelming feelings begging me to burst into tears, requires so much energy. Stuffing feelings about illness doesn’t make the illness go away. It can actually make the illness worse.

The Time Magazine article called, Ignoring Your Emotions is Bad for Your Health, says, “Thwarting emotions is not good for mental or physical health. It’s like pressing on the gas and brakes of your car at the same time, creating an internal pressure cooker.” My friend’s example encourages me to let some of the pressure out by being sad, angry, or scared, but not live there permanently.

Find a Way to Get It All Out

Find someone or some way to express the feelings. I realize there’s no one I’ve ever told all my worries to. I don’t want that as part of any of my relationships. A wonderful way to manage expressing negative worries is to grab a pen and paper (or computer) and write them all out. Get them out!

If you have someone you can talk to without overburdening them and burning them out, then do it. It may be best if this person is a professional therapist or coach instead of someone in your friend circle. If you’ve ever been burned out by a friend oversharing personal stuff, you know what I mean. Professionals are pros at handling the information without having it affect them personally.

This is their training, and they survive by being good at it. You can dump it out and they will help you sort through it for the best possible solutions. Another avenue, if you are a person of faith, is prayer. Telling God my stuff is safe. I trust it’s not being shared with others, and I feel heard and understood.

My Experience with Relaxation Techniques

Are you tired of hearing about relaxation techniques to manage stress? Have you tried any? Deep breathing by simply taking a longer breath can help clear your mind. I’ve tried many relaxation tips as I’ve coaxed myself back to sleep from a worried state. Sometimes they work, so they are worth another go of it.

Progressively relaxing my muscles from the top of my head to my toes gives some relief. Intentionally going through this exercise helps me realize my shoulders are tense or my stomach is in a knot.

Other helpful hints are to listen to uplifting music, play a game, read a book, take a walk with a friend, or watch a funny YouTube video on cats! Distraction is a helpful balancing tool sometimes used to keep worry at bay.

How Would I Treat a Friend Who Told Me They Were Sick?

I’d bring them soup, listen to their story and encourage them to rest. Also, I’d be gentle with them, trying to understand the feelings that surfaced. Finally, I’d allow all sorts of emotions, then encourage other options.

Can you begin to treat yourself as you would your good friend? Talk gently to yourself about this situation. Choose healthy food and try to rest. See the doctor and follow through on medications prescribed. This focuses on what is within your control. Where are small steps you can take to affect your health for the better? Only you can answer this. Reflect on what you can do in your situation, then take one positive action step within your control on your healing path.

Let’s Have a Conversation:

Please share the methods you have used to manage health concerns. What has worked the best? What has caused more emotional pain? Have you landed on a way to stay in the steady and calm mode more than the other modes?