October 31, 2019
Thinking About Social Security Timing Differently | Berry’s Bites
Attorney and Advisor Christopher Berry discusses some common and not so common strategies for when and how to take Social Security. www.michiganestateplanning.com
On today’s episode of Berry’s Bites we’re going to talk about Social Security timing. So a lot of people assume that as soon as they retire they should automatically claim Social Security with the idea that, well how am I going to cover this income gap in retirement? But there’s a lot of different strategies available.
In fact, we do some workshops on Social Security timing and one of the things keep to in mind is that every year you delay taking Social Security up until age 70, you get basically a 8% raise. Where the amount of income you get each month grows by 8% and so if you were to wait until age 70 to claim Social Security, then that’s going to be about 132% of whatever your full retirement age Social Security benefit would be. Your monthly benefit. Whether your claim at 66 and a half or age 67 because your full retirement age is based on when you were born and it’s either going to be either 66 or age 67.
Thinking About Social Security Timing Differently Transcript:
Welcome. On today’s episode of Berry’s Bites we’re going to talk about Social Security timing. So a lot of people assume that as soon as they retire they should automatically claim Social Security with the idea that, well how am I going to cover this income gap in retirement? But there’s a lot of different strategies available.
In fact, we do some workshops on Social Security timing and one of the things keep to in mind is that every year you delay taking Social Security up until age 70, you get basically a 8% raise. Where the amount of income you get each month grows by 8% and so if you were to wait until age 70 to claim Social Security, then that’s going to be about 132% of whatever your full retirement age Social Security benefit would be. Your monthly benefit. Whether your claim at 66 and a half or age 67 because your full retirement age is based on when you were born and it’s either going to be either 66 or age 67.
So one of the things to consider is maybe delay taking Social Security and then the question would be, well how am I going to cover my income gap in retirement? If I delay taking Social Security and I still have these expenses coming in, then how am I going to cover those expenses? Well this fits nicely into a tax efficient retirement strategy where that time from 67 to age 70 maybe we pull money from those qualified accounts like the IRAs and the 401ks to pay the taxes now to cover your income, so that once you turn 70 and a half, you’ve diffused a little bit of that ticking tax time bomb that can happen in retirement.
Because once you turn 70 and a half, now you have to start taking out required minimum distributions which are taxed and so by delaying taking Social Security and pulling money from these tax deferred accounts, we can minimize or create more of an efficient retirement from a tax perspective. There’s lots of different strategies around Social Security.
Another option, and I was just talking to a client about this, is that maybe we should explore the idea of taking Social Security earlier because let me ask you this question. Would you rather give your best years of your health to your employer or would you rather give it to your retirement? So let’s say that we were to retire at age 62. Claim Social Security at this point and then we could engage in what’s called a start, stop, restart strategy, where we take Social Security from 62 to 66 or 67 whatever, full retirement age is. And this is the time that we can travel and enjoy our health and then at full retirement age, maybe we halt Social Security. So we stop it and we allow it to grow from 67 until age 70 growing at that 8% a year. During this time we might create our own private pension of utilizing our own assets to create an income stream to get us from 67 to 70.
So understand that Social Security timing, it’s not a cookie cutter answer. In fact I think there’s about 567 different age calculations that have to go into maximizing Social Security. So it’s a lot more complicated than people think and it’s one of those things that once you choose your Social Security strategy, you’re basically locked in. You can’t really make any changes.
So I just wanted to talk a little bit about Social Security. One of the things that we can do for our clients is run a Social Security optimization report to look at how can we maximize Social Security for your retirement. So hopefully you found this helpful. Stay tuned on our website. We’ve had a lot of Social Security workshops in the past and we have some scheduled moving forward. If you want some more information, just go ahead and reach out to us. So this has been Chris Berry with Berry’s Bites. Take care.