What’s Your Social Security Strategy?

April is National Social Security Month. During this month, the Social Security Administration makes an extra effort to educate future recipients on their benefits. If retirement is on the horizon for you, this may be the right time to estimate your payments and develop a strategy.

Social Security is a valuable resource for most retirees. In fact, 90 percent of those age 65 and over receive Social Security benefits. The average monthly retirement benefit is $1,461. While that’s a significant amount, it’s probably not enough to completely fund your retirement. Social Security represents one-third of total elderly income.1

How much can you expect from Social Security? The formula used to calculate your benefit amount is fairly complex, but it’s based around two primary factors:

  • Your career earnings
  • Your age at the time you file for benefits

If you have a general understanding of how benefits are calculated, you can make informed decisions as you approach retirement and plan your Social Security strategy. Below are a few ideas to consider to help you maximize your income.

Career Earnings

Social Security is primarily funded through payroll taxes. The more you earn, the more you pay in taxes, up to a maximum. Similarly, the more you earn, the higher your potential benefit in retirement. Just as there is a cap on your Social Security taxes, there’s also a maximum benefit amount. In 2019 the maximum benefit amount is $2,861 per month.2

Social Security bases your benefit amount on an average of your 35 highest-earning years.3 If you have less than 35 years of earnings, however, Social Security fills in the remaining time with zero earnings. Those years without earnings can be a drag on your average, which can reduce your benefit. Consider working long enough to get a full 35 years of earnings history so you can increase your average.

Age at the Time of Filing

Your age at the time you file can have a significant impact on your benefit amount. Everyone has a full retirement age (FRA). This is the age at which you can file for full benefits based on your career earnings. Most people’s FRA lands between their 66th and 67th birthdays.4

However, you can file for your benefits as early as age 62. If you do file early, though, your benefit amount is reduced. The earlier you file, the greater the reduction. If your FRA is 67 and you file as you become eligible at 62, your benefit is permanently reduced 30 percent.4 While it’s tempting to file for Social Security as soon as you’re eligible, you may want to consider whether you can afford a sizable reduction in your benefits.

On the other hand, you can increase your benefit by delaying your filing. Social Security offers an 8 percent benefit increase for every year past your FRA that you wait to file. The benefit credits stop at age 70. For example, if your FRA is 67 and you delay your filing until 70, you could permanently increase your benefit amount by 24 percent.5

Ready to maximize your Social Security benefit? Let’s talk about it. Contact us today at Protecting Your Retirement. We can help you analyze your needs and develop a strategy. Let’s connect soon and start the conversation. Our telephone number is 913-648-2700.

1https://www.ssa.gov/news/press/factsheets/basicfact-alt.pdf

2https://www.usatoday.com/story/sponsor-story/motley-fool/2018/11/27/its-official-these-5-social-security-changes-coming-2019/2121041002/

3https://www.ssa.gov/oact/cola/Benefits.html

4https://www.ssa.gov/planners/retire/retirechart.html

5https://www.ssa.gov/planners/retire/delayret.html

Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.

The presentation is not intended to be investment, legal or tax advice. The presenter can provide information, but not advice related to social security benefits. The presenter may be able to identify potential retirement income gaps and may introduce insurance products, such as an annuity, as a potential solution. For more information, contact the Social Security Administration office, or visit www.ssa.gov.

18674 – 2019/3/20