Social Security is MY MONEY, and I Want It Now

AUTHORS, Financial & Estate Planning, Karl Edmunds, RETIREMENT PLAN, Social Security |

Social Security Benefits

:: by Karl Edmunds ::

At times in the past few years, I have bought into the growing cynicism among senior citizens regarding the unlikelihood of collecting Social Security in retirement. In a casual conversation often you hear people say, “I don’t expect any Social Security to be available to me when I retire.” I too, have declared this expectation but deep inside, I want and need that money to be there for me and like many, I think I earned it.
The bottom line is that neither I nor anyone else can accurately predict the availability of Social Security any more than I can predict with blazing accuracy how much money I need when I retire. So if we are willing to assume there will be an income benefit, how do we maximize the potential benefits based on the rules in place right now?
First, your skepticism may suggest that you apply for Social Security benefits as early as possible and take advantage of the present value of money—real dollars now versus no dollars later. Based on present rules of the Social Security game, this approach is not a good strategic retirement move even though about half the people do it.
If you are one of the boomers born between 1943 and 1954, your target year to begin taking social security is 66. If you go for it early at 62, get ready to take a 25% hit but if you wait until 70 you can expect an incremental benefit of about 32%.
What does this mean?
Assume you were in good health and were qualified to make $1,000 at 62 but chose to wait until 70, would you prefer an extra $300 plus per month for the rest of your life from age 70 forward? And your social security payment is adjusted for inflation.
Moreover if you wait and work for another 8 years funding your Roths and 401Ks and feverishly pray for a stock market that finds a way to move in a positive upward trend, then you will have that much more for real retirement needs. Let’s proclaim that we never want to see the DOW at 10,000 again!
If you are married, it is highly recommended for the primary wage earner to wait as long as possible before applying for social security. If the husband is the primary earner and dies, his widow gets 100% of his benefit. But if the husband jumps in at 62, the wife must also pay the roughly 25% penalty in future income distributions.
Now yes, one can argue that delaying your benefits is only worthwhile if you live well into your 70s or even your 80s and therefore it is not worth the risk because the probability of death increases with age. This is a valid argument as well. But life expectancies are steadily increasing so it is imperative to act and plan as if you will live a long life.

Tags: collecting social security, retirement security, Social Security, social security payments