When to start social security benefits
"I have a client who wants to know the best time to claim his/her Social Security benefit"...What a planner needs to understand about the optimal claiming age.
What is Social Security's role in retirement security?
(David A. Littell, JD, ChFC®, CFP® and Kenn Beam Tacchino, JD, LLM and Steven A. Sass, Ph.D.)
A discussion identifying the percentage of retirement income people are currently receiving and expected to receive from Social Security, as well as a discussion of the future of Social Security. We learn that Americans currently are, and will continue to be dependent on Social Security and that Social Security, altough modified, will be available for clients in the future.
Can your client count on Social Security?
(Bruce D. Schobel and David A. Littell, JD, ChFC®, CFP® and Kenn Beam Tacchino, JD, LLM )
We speculate about the future of Social Security. We learn that a discount rate could be used by planners and that planners should count on changes to the system.
How is the primary insurance amount calculated?
(Bruce D. Schobel and Kenn Beam Tacchino, JD, LLM and Steven A. Sass, Ph.D.)
We learn how the components of the PIA calculation affect the clients potential claiming-age choice. We learn that working longer can not only provide for a salary, but also for a bump in Social Security benefits.
How do Social Security cost of living adjustments work?
(Bruce D. Schobel and Kenn Beam Tacchino, JD, LLM and Steven A. Sass, Ph.D.)
We examine the rules and potential changes possible for cost of living adjustments under Social Security. We learn that clients who wait to claim Social Security benefits will get the benefit of COLAs that occur prior to claiming.
How are the Social Security claiming rules different for people born on the 1st or 2nd day of the month?
(Bruce D. Schobel and Kenn Beam Tacchino, JD, LLM and Steven A. Sass, Ph.D.)
We examine some quirky Social Security rules. We learn how minor rules can have a big impact for some clients. We also learn that the initial claiming age for most clients is not age 62, but age 62 and 1 month.
How does the spousal benefit reduction for early claiming age work?
(Bruce D. Schobel and David A. Littell, JD, ChFC®, CFP® and Steven A. Sass, Ph.D.)
We discuss the rules that apply if a spousal benefit is claimed prior to the spouses full retirement age. We learn that if a spouse claims at age 62 he/she will get 70% of the 50% benefit to which he/she is entitled.
How do widow’s benefits work?
(Bruce D. Schobel and David A. Littell, JD, ChFC®, CFP® and Steven A. Sass, Ph.D.)
We examine the widow’s benefit. We learn that widows can be eligible for both a widow’s benefit or a worker’s benefit and this can lead to several planning considerations.
How do the windfall elimination and government offset provisions impact Social Security benefits of individuals with employment outside the Social Security system?
(Bruce D. Schobel and David A. Littell, JD, ChFC®, CFP® and Kenn Beam Tacchino, JD, LLM )
We examine special rules that apply to about 25 percent of state and local government workers and others not covered by the Social Security system. We learn that provisions are in place so that these workers will not be able to fully take advantage of the Social Security system.
How does the earnings test work?
(Bruce D. Schobel and David A. Littell, JD, ChFC®, CFP® and Steven A. Sass, Ph.D.)
We examine the traditional earnings test, the earnings test that applies in the claiming year, and the earnings test that applies in the full retirement year. We learn that benefits are not lost, they are suspended and recalculated.
How are Social Security benefits taxed?
(David A. Littell, JD, ChFC®, CFP® and Kenn Beam Tacchino, JD, LLM )
A look at the concept of provisional income and the income limits that exempt Social Security form federal taxation. We learn that some clients will receive all of the Social Security tax free, some will have up to 50 percent of their Social Security taxed, and some will have up to 85 percent of their Social Security taxed.
What is the Social Security tax torpedo and how can it be avoided?
(Bruce D. Schobel and Kenn Beam Tacchino, JD, LLM and Steven A. Sass, Ph.D.)
We discuss that each dollar coming from a 401(k) may result in more Social Security being taxed. We learn how to avoid the “tax torpedo”.
What is the financial impact of choosing one claiming age over another?
(David A. Littell, JD, ChFC®, CFP® and Kenn Beam Tacchino, JD, LLM and Steven A. Sass, Ph.D.)
A discussion of the rules impacting the amount a client will receive based on when they claim Social Security retirement benefits. We learn that delaying receipt of benefits is valuable under a variety of techniques used to measure value.
Why should planners advise their clients not to retire early?
(David A. Littell, JD, ChFC®, CFP® and Kenn Beam Tacchino, JD, LLM and Steven A. Sass, Ph.D.)
A look at the impact that taking early retirement might have on health insurance, the earnings test, quality of life, and the social status of a client. We learn that there are a variety of reasons to delay retirement.
When should married couples claim Social Security?
(David A. Littell, JD, ChFC®, CFP® and Kenn Beam Tacchino, JD, LLM and Steven A. Sass, Ph.D.)
A discussion of joint claiming strategies for married couples. We learn when the maximizing age will occur depending on average life expectancies.
When may a person sequentially claim three types of Social Security benefits?
(Bruce D. Schobel and Kenn Beam Tacchino, JD, LLM and Steven A. Sass, Ph.D.)
We examine the triple dip strategy. We learn that a spouse may have the opportunity for three sequential Social Security benefits.
How does the claim and suspend strategy work?
(Bruce D. Schobel and David A. Littell, JD, ChFC®, CFP® and Kenn Beam Tacchino, JD, LLM )
We review the claim and suspend strategy. We learn that spousal benefits can be paid to a wife if the husband is full retirement age, claims benefits, then suspends benefits in order to maximize the monthly amount of his benefit.
How does the claim now, claim more later strategy work?
(Bruce D. Schobel and David A. Littell, JD, ChFC®, CFP® and Kenn Beam Tacchino, JD, LLM )
We examine the impact of being eligible for both your own and a spousal benefit. We learn how to get the largest possible Social Security benefit payable for the longest possible period of time.
Should the claiming-age decision be framed as insurance against longevity risk?
(Bruce D. Schobel and Kenn Beam Tacchino, JD, LLM and Steven A. Sass, Ph.D.)
We discuss problems with the net present value break-even age way of looking at the Social Security claiming age decision. We learn that the majority of people will benefit from framing the issue as a hedge against longevity risk because later claiming provides more of the clients needed replacement ratio and provides other protections for later life.
Is claiming early and preserving 401(k) assets a better option for longevity risk protection, or vice versa?
(Bruce D. Schobel and Kenn Beam Tacchino, JD, LLM and Steven A. Sass, Ph.D.)
We compare whether a client will be better off holding onto 401(k) assets and claiming Social Security at age 62 or waiting until age 70 to claim Social Security and spending down 401(k) assets. We learn that unless the 401(k) can earn an extraordinary rate of return clients should delay claiming and spend-down their 401(k).
Is it better to defer Social Security and withdraw other financial assets?
(Dr. William Reichenstein, CFA and David Nanigian, Ph.D. and David A. Littell, JD, ChFC®, CFP®)
We discuss the effect on portfolio success when comparing whether a client should draw down Social Security assets while she waits for deferred Social Security or claim Social security as soon as possible to preserve other assets. We learn that deferring Social Security can actually help to extend the portfolios longevity.
What is the net present value strategy?
(Bruce D. Schobel and Kenn Beam Tacchino, JD, LLM and Steven A. Sass, Ph.D.)
We discuss when to apply the net present value strategy. We learn that affluent clients may benefit from delayed claiming if they live to a specified age.
What is the net present value strategy?
(Dr. William Reichenstein, CFA and William Meyer and Kenn Beam Tacchino, JD, LLM )
We chronicle how the break-even, net present value strategy works. We learn how a real interest rate of zero affects the break-even analysis.
What is the break-even analysis approach to when to claim Social Security benefits?
(Dr. William Reichenstein, CFA and David Nanigian, Ph.D. and David A. Littell, JD, ChFC®, CFP®)
We discuss an example of how the net present value break-even strategy works. We learn that in some cases age 80 or 80.5 will be the break-even age and a single client who is going to live beyond that age may want to delay claiming Social Security benefits.
Why are clients reluctant to defer Social Security benefits?
(David A. Littell, JD, ChFC®, CFP® and Kenn Beam Tacchino, JD, LLM and Steven A. Sass, Ph.D.)
We analyze the reasons people start Social Security at the earliest claiming age of 62. We learn that the impact of the decision is not well understood by clients.
How could the claiming-age decision be affected by future changes to Social Security
(Bruce D. Schobel and Kenn Beam Tacchino, JD, LLM and Steven A. Sass, Ph.D.)
We examine possible changes to Social Security and how they will impact the claiming age decision. We learn that even after changes to Social Security the decision process that we use today will continue in substantially the same way in the future.
How can Social Security claiming software be used?
(Dr. William Reichenstein, CFA and William Meyer and Kenn Beam Tacchino, JD, LLM )
We analyze when to claim Social Security benefits using software. We learn the key elements of the software by examining a case study.
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