By Randy Porzel, Lead Advisor at Private Vista
As Baby Boomers near retirement, one topic seems to rise to the surface in conversation – Social Security. Americans are living 25+ years in retirement, which makes it even more important to be well educated on this topic.
While there is no single answer to the question “When should I take Social Security?”, there are several factors to consider when making your decision: health, spouse, family longevity and need for income. In addition to these factors, here are three things to think about when making your decision.
1) Avoid taking benefits prior to your Full Retirement Age
Social Security allows you to begin taking benefits as early as 62 (Social Security Administration, n.d.). If you have other resources to live on, you should not take benefits early for several reasons:
- Benefits will be permanently reduced by 25% compared to your full retirement age (age 66 if born between 1943 and 1954).
- If you were to pass away, your spouse would also be locked in to the reduced amount if he or she were dependent upon your benefits.
- If you continue to work full or part time while collecting benefits prior to your full retirement age, social security will withhold benefits for any income you earn over $16,920.
2) We’re living longer – it pays to delay
The average life expectancy has continued to increase over the years – currently the life expectancy for people living at age 64 is 82.4 years for males and 85 for females. Benefits of delaying social security include:
- Social Security will grow your benefit by 8% for each year you delay taking benefits, up to age 70. For someone that reached their full retirement age at 66, delaying benefits until age 70 would provide a benefit 32% higher. When compared to someone that took benefits at age 62, delaying until age 70 would pay a benefit 76% higher.
- If you were to pass away, your spouse would benefit from the increased amount by assuming your benefit for the rest of their life.
- The breakeven is around 82 years old. That means for each year you (or your spouse) live beyond 82, it would be more beneficial to delay benefits until age 70. If both you and your spouse were to pass way before age 82, it would have been better to take benefits closer to your full retirement age.
3) Social Security is not broke – yet
Even though they have other assets to live on, some people choose to take benefits at 62 based on the fear that Social Security will run out of money. According to the 2016 annual report from the Social Security Board of Trustees, the program has reserves to pay benefits through 2034, and could pay nearly 75% of benefits through 2089.
Although Social Security is only a piece of your Financial Plan, its ability to preserve your portfolio and provide steady income will grow to play a larger role. If you’re concerned about how your decision will affect your Financial Plan, consider talking to a Financial Advisor who can explain the pros and cons of your options.
Information from www.ssa.gov
This piece is not an offer or a solicitation to buy or sell securities. The information contained in this piece has been compiled from third party sources and is believed to be reliable; however, its accuracy is not guaranteed. This piece should not be construed as investment advice. Any opinion included in this piece constitutes the judgment of Private Vista, LLC as of the date of this piece, and is subject to change without notice.
Additional information, including management fees and expenses, is provided on Private Vista, LLC’s Form ADV Part 2.