Most Americans treat Social Security benefits about the same way they treat paying into Social Security. That is, they pay almost no attention to it at all. Many are like a friend of mine who is sure that she won’t live particularly long because she has diabetes. It’s true that her diabetes is likely to rob her of a few years of life, but she’s paying no attention to the fact that she has it under control or to the fact that despite her own nearness to retirement age, her mother remains very much alive. Therefore, she’s hoping to apply for her benefits as soon as she hits the minimum 62 years of age. Since her husband is close in age to her and has the same intentions, my friend is likely to feel robbed in the not too distant future. Since it’s absolutely against the law to force people to make the decision you would make, I thought I’d offer some tips in lieu of beginning my life of crime by hijacking Seniors at the SSA office.
- Use a calculator and I don’t mean the one in your kitchen junk drawer. I’m recommending that you take the time to find out when it’s best for you to apply for benefits. About 13 percent of Baby Boomers never married. For those permanently single individuals, your claiming choices are fairly simple. You can take benefits at early retirement age, wait to full retirement age or wait until age 70 and claim you maximum amount then. Everyone else should use a Social Security calculator. Luckily, the price of using one begins at my favorite price—free. The Wall Street Journal recently ran an article on the best five free Social Security calculators. You can read that article here.
- Hire a financial advisor. The calculators will provide you with some strategies but those strategies won’t take into account other retirement funds and how to balance the tax benefits and claiming options available. Even the single Baby Boomers have options about timing when to begin claiming other retirement benefits and whether or not being able to postpone claiming Social Security benefits will end up with a larger benefit in the end. Financial planners cost money but they can end up paying for their advice within just a few months if you go to one who really knows Social Security and retirement benefits. Contact our office for a list of advisors that understand Social Security is an annuity with benefits.
- Educate yourself on Social Security. There are all sorts of wild hares out there when it comes to Social Security. And they can make it especially confusing. Spend some time learning about how a divorce, a death, a late-life marriage, a dependent child or dependent grandchild can change your Social Security strategy. If you change your mind about retirement and get back into the game, how will that affect your benefits? I often recommend “Ask Larry,” a PBS regular feature that by the sheer number of posts about the topic can awaken an appreciation for just how complicated Social Security really is. One of his most recent articles speaks about how your benefits could change over the years and you could miss money you should have earned. Not surprisingly, Social Security doesn’t keep an eye on everyone’s benefits and notify them when they could be claiming more so it’s your job to know when something might change to your benefit.
Respect your Social Security benefits. The final combined retirement benefit is likely larger than any other retirement benefit you have. Understanding basic information about how that benefit can grow or shrink can mean the difference between living comfortably and living in poverty.