Aahhh… You turn 62, apply for Social Security and collect your benefit… right? Not so fast. You might be leaving money on the table. When it comes to Social Security retirement benefits, there are always questions, plenty of confusion, and sometimes costly mistakes.
Hello, I’m John Grande, the Wisconsin Region Executive for Old National Wealth Management and I’d like to help you maximize your retirement benefits through Social Security.
Social Security, a system of benefits designed to make retirement easier.
In 1935, President Roosevelt signed it into law when life expectancy was age 61. Did you know that the very first income beneficiary, Ida Mae Fuller didn’t realize she was eligible for benefits until she happened to ask in 1940?
But how about you? There is broad confusion about when to take your benefit and how, exactly, the program works. Do you know how to make the most of it?
With over 2,000 filing rules and infinite calculations based on whether you are: married, single, divorced, widowed, born before certain dates, and then, there’s the age of your spouse! It’s very easy to get lost in the details. Details, that inadvertently overlooked, could end up costing you plenty. Your challenge is to find the strategy that suits you and your situation. That’s why we’re here.
Let’s take look at the quandary that married folks often face…
At what age should we file, and How do we coordinate benefits?
See if this sounds familiar…
Jim and Debbie are spouses, both age 62.
Both are eligible for a monthly benefit of $2,500 and $1,800 dollars respectively.
They’d like to begin benefits now, but have heard they should wait until age 70.
What should Jim and Debbie do?
To help this couple decide we are also going to make the following assumptions:
- First is a 2% annual cost of living adjustment to their benefits
- Then, using the current Life Expectancy calculator, we learn that on average:
- The Male spouse will live to age 84
- And the Female to age 86
Since our analysis will be based on total benefits received, to account for the differences in when Jim and Debbie begin their benefits, we are also going to assume benefits accumulate at 4%.
As you look at this grid you’ll notice Jim and Debbie individually have 9 opportunities to file. That means as a married household there are 81 different combinations - each with a different financial outcome.
Based on our assumptions, neither filing at age 62 nor 70 was the optimal strategy for this household. The darker the color here, the higher the benefit. The best strategy to maximize benefits is for Jim to file at 69, and Debbie at 67. By doing so, the optimal strategy produces $108,000 dollars more than filing at age 62 and $33,000 dollars more than waiting until age 70.
$108,000 dollars more!
Remember Ida Mae, our first recipient of Social Security? What I didn’t tell you was that after receiving her first check that Ida lived another 35 years, until she died in 1975 at age 100.
If Debbie also lives to 100, the optimal strategy of filing at ages 69 and 67 would have exceeded the typical action of filing at age 62 by $645,000 dollars!
I hope this information helps you realize the importance of strategizing and planning ahead. For answers to many questions about Social Security benefits, go online to ssa.gov. For help determining what role Social Security benefits will play in your financial future, contact an Old National Wealth Management Client Advisor or other responsible professional. He or she will provide the knowledge and perspective to help you build and maintain a retirement strategy that works best for you.
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