For many Americans today, the greatest fear they face is not death, but the risk of outliving their assets during retirement. If you happen to fall into that category, you may be wondering what the best strategy is to maximize your social security benefits and create a financial plan that will minimize your taxes so you can live the prosperous retirement you’ve always dreamed of. Which brings us to how you can maximize your Social Security income.
First off, I want to say that this topic alone can be quite complicated and extensive, and due to the length of this video, I’m really just going to cover some of the basics about Social Security. My main goal is to inform you but also motivate you in order to take the extra step to find out exactly how to get the most out of your Social Security.
The problem with most retirees that they face going into retirement, specifically to Social Security, are two things.
- First, is that there are over 500 different ways in which a married couple can file for Social Security. How is somebody supposed to know which is the single best way for them to get the most amount of income?
- Second, is that if you walk into the Social Security Administration department office on the day that you’re ready to file for your Social Security and you ask the person, “What is the best filing strategy for me?” they’re not going to tell you. They’re not going to give you that advice.
That’s not the type of advice that they give you. They might give you some information about, you know, how it works in general, but they’re not going to tell you which is the best way to get the most amount of income.
So lets go over just some of the basics of Social Security just to give you an outline of how it works and why it’s important to get the most benefits possible.
SSI Key Information
For starters, anyone can file anywhere between age 62 and age 70.
You can’t file before and you can’t file after that. The way that it works is that the Social Security Administration, they say, “Okay, there’s going to be a perfect age to file that we call ‘full retirement age’.”
This FRA is when you receive your full benefit.
Generally speaking, it’s going to be between age 66 and 67. It depends on the year you were born, but generally, that’s where it’s going to be.
Now, the way that it works is that if you retire at your full retirement age, you get your stated benefit. However, if you choose to retire prior to your full retirement age, there is a calculation that’s done that figures out how much your income is going to be reduced.
Then, if you defer past your full retirement age, there’s a separate calculation that is done to figure out how much your benefit is increased, but it’s all dictated around this full retirement age.
Now, you might say, “Well, it’s pretty simple how I’m going to get the most amount of benefit out of Social Security. If I just wait longer, then I just wait to age 70 and that’s going to give me the most amount of income.”
The problem with that is that most people file for their Social Security benefit at age 62. Why would people file for Social Security at age 62 if it’s the least amount of income that they’re going to get?
Well, there’s been a number of studies into this and it’s pretty unanimous the reasons in which people file at the youngest age. One of the reasons is that a lot of people don’t believe Social Security’s going to be there for the long run and that they should file it now and get it while they can. That’s a really unreasonable thing to think about because once you qualify for a Social Security benefit, the likelihood of that ever being taken away from you is very unlikely.
The other reason is that not everybody has the ability to actually work past age 62. Most of the people that file at age 62, they do it because their health or because of family issues where somebody else in their family had health issues and they had to take care of them.
In a way, they’re forced to file at 62.
Also, they might lose a job and they might be able to get back to a good job in which they’re not quite as hireable at an older age and they might not be able to find a job that they want to work at just for those last remaining years. They simply just choose to retire early.
But the result of this is that Social Security, for most people, for people that make an above average amount of income that is over $59,000 per year, it only replaces 40% of their income that they had going into retirement.
That’s a pretty big problem because people generally cannot live off 40% of their income.
Maximizing your Social Security is extremely important because we need to work on figuring out a way to get the most amount of benefit, that works for your particular financial situation and health situation, so that we can replace more of that income and have a higher amount of your income replaced in retirement.
Like I mentioned before, I’m not going to be able to get into the particulars of all the different claiming strategies that are available to people and retirees today.
What I do want to show you is the results of running a fairly average couple through our proprietary Social Security calculator.
SSI Max Strategies
We ran this couple through our calculator and what we found is that if they both filed for Social Security at age 62, the lifetime amount of benefits that they were to receive all the way up until their life expectancy would be $1,079,000.
That’s a lot of money, it’s a significant amount of money, but if they simply just defer their income to full retirement age, then it would be $1,213,000.
That’s a pretty big increase in their guaranteed income for the rest of their life by just simply deferring to full retirement age.
If they defer to age 70, their income goes up even more. It goes up to $1,395,000, just under $1.4 million. Deferring to age 70 is easily going to give you the most amount of guaranteed income but notice that there’s actually a suggested strategy here that we listed that says that this couple can get $1,465,000 of guaranteed income.
There are other claiming strategies that are available to people in retirement over and above just deferring to age 70. But, if you have the ability to have somebody run a calculator for you and figure out if this is an option for you, you can see that the result is that you can have a 36% increase in the amount of guaranteed income that you get during retirement.
You might be asking yourself, “Okay, I understand this is super-important. I need to do something about this.”
The question is, “What is the next step?”
Get Started
You need to go to www.ssa.gov and get your statement there.
If you have not registered there, you have to register and once you do, you have the ability to download your statement.
That statement is going to show you exactly what your benefit’s going to be, it’s going to be projected to be at full retirement age, what it would be if you defer to 70, and what if you take it early.
It’s going to show you the whole range of different income options that you have available to you.
Like I said, deferring to 70 is just not always going to be the best strategy.
There are a lot of other factors that go into this like health and family issues and other things that can figure out which is the best for you. There’re other claiming strategies that are going to be available to you that are over and above simply deferring.
You need to work with a qualified advisor that can give you the proper advice in order to run the calculation for you, but also work with those other issues to figure out if you can actually defer it to those later ages.
You see, the main point is to say, is that Social Security only replaces 40% of your income.
Let’s say that you maximize your Social Security, you get the most amount of benefit, you’re still only replacing maybe 60% of your income. What are you going to do to actually get the rest of that income that you need?
Everybody likes Social Security for a number of reasons:
- The first reason they like it is because the income is completely guaranteed for as long as they live.
- The second reason is, is that every year that they defer the income, the income is going to go up and it’s going to be greater and greater each year you defer.
- Third is that when you turn on the income, that income is going to increase every year for inflation.
Those are the three main reasons why people like Social Security. Unfortunately, you cannot send a check to the Social Security department and buy more Social Security, it doesn’t work like that. You need to find other financial products out there that can give you a guaranteed income for life, that will increase each year you choose to defer it, and then third, will increase after you turn the income on.
Only a qualified advisor will be able to give you the advice for the Social Security and also give you information about how to get more of that guaranteed income.
My main takeaway for you is this… On the day that you think that you’re ready to retire and get Social Security benefits, when you walk into the Social Security Administration department office, you should walk in there and be prepared to tell them exactly how to file for Social Security. You do not want to ask that person for advice on which strategy is best for you because they won’t give it to you.
If you take these next steps and work with somebody who’s qualified to give you this advice, you can simply walk in there and tell them exactly what you need.
If you have any questions about the information presented here, or would like to have a conversation about your own estate plan (or lack of one), please click the link and contact me today.