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?
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.
How is the primary insurance amount calculated?
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?
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?
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?
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 the windfall elimination and government offset provisions impact Social Security benefits of individuals with employment outside the Social Security system?
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?
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?
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 financial impact of choosing one claiming age over another?
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?
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.
How does the claim and suspend strategy work?
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?
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?
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?
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?
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 break-even analysis approach to when to claim Social Security benefits?
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?
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
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.
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