​Deciding when to start taking Social Security benefits is one of the most crucial financial planning decisions you will make as you approach retirement. The timing of your claim can significantly impact your financial well-being throughout your retirement years. In this blog post, we will explore why it is essential to determine the right time to take Social Security and how we can help you in making a more informed decision.
 
Why Timing Matters
 
The age at which you begin claiming Social Security benefits affects the amount you receive monthly. Here are some key points to consider:

1. Early Claiming Reduces Benefits: You can start receiving Social Security benefits as early as age 62, but doing so will permanently reduce your monthly payments. For example, if your full retirement age (FRA) is 67 and you claim at 62, your benefits could be reduced by up to 30%1.
2. Full Retirement Age (FRA): Your FRA is the age at which you are entitled to receive 100% of your Social Security benefits. This age varies depending on your birth year but is generally around 66 to 67 for most people1.
3. Delayed Retirement Credits: If you delay claiming benefits beyond your FRA, your monthly benefit amount will increase. For each year you delay, up to the age of 70, you can receive an increase of about 8% per year. This can result in significantly higher lifetime benefits, especially if you live longer2.
4. Longevity and Health Considerations: Your health and life expectancy play a crucial role in deciding when to claim Social Security. If you expect to live longer, delaying benefits might be more advantageous. Conversely, if you have health concerns, claiming earlier might make more sense.
5. Spousal Benefits: If you are married, coordinating the timing of Social Security claims with your spouse can maximize your combined benefits. Understanding spousal and survivor benefits is essential for optimizing your overall retirement income2.

 
How We Can Help

We use a powerful financial planning tool called RightCapital. This is a powerful financial planning tool that can help you navigate the complexities of Social Security claiming strategies. Here is how it works:

​RightCapital's Social Security Optimization module allows you to compare different claiming strategies and their impact on your retirement income. You can examine the income amounts and break-even points for various filing strategies, helping you make an informed decision3.
 
Here we can see the software has computed the optimal strategy for this sample couple vs. their current desired ages for claiming social security (i.e., 62 years of age for both spouses), the difference in claiming strategy benefits is substantial at $951,513 over their expected lifetimes.

​Obviously, longevity figures into this strategy and many clients will question at what age is there a crossover or breakeven in benefits. In the case of this sample client, that breakeven is at age 77. If their family histories led them to believe they would not live to age 77, this client would obviously opt to take their benefits early. However, as a rule, most U.S. persons are living longer, and medical advances continue to extend the age the average American will survive too.

​A comparison graph allows us to look at all the options outlined by the software and to make certain judgements based on the varied scenarios as there is no one right answer for all clients. 

Finally, we can look at Social Security claiming if for example that the client had an aggressive reinvestment plan for such payments that made taking the benefits early. In this example, let us assume the client was involved in private equity and these funds would benefit from reinvestment at return rates greater than 10% per annum.
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In this case, the entire strategy is turned upside down and the couple then benefits from retiring earlier at age 67 for each (still not the early retirement they had initially desired).

Conclusion
Determining the right time to take Social Security is a critical decision that can have a lasting impact on your retirement income. By understanding the factors that influence your benefits and using tools like RightCapital, we can help you make informed decisions that maximize your financial well-being. Whether you choose to claim early, at your FRA, or delay until age 70, we can provide the insights and guidance you need to make the best choice for your unique situation.
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Feel free to reach out if you have any questions or need further assistance with your financial planning and wealth management!
 
1Charles Schwab Guide on Taking Social Security 
2 The Motley Fool on Social Security Benefits 
3 RightCapital Social Security Optimization Tool

I recently have been reading a book by Bob Carlson called Where’s My Money?  The book is all about the exciting topic (sarcasm) of Social Security claiming and getting the most out of this important retirement benefit.
 
One of the topics of the book is the importance of checking your Social Security wage history. Bob Carlson makes the case that you should do so for two reasons:

1. To make sure your wage history is accurate and complete; and
2. To see if there are ways you can influence that history to maximize your Social Security Benefits.

 
Let us start with why your history is important.
 
Your earnings history is a record of your progress toward your future Social Security benefits. The Social Security Administration (SSA) uses your highest thirty-five years of earnings to calculate your benefit amount when you sign up for benefits.
 
If there are errors or omissions in your earnings record, you may not get credit for money you paid in payroll taxes, leading to lower future Social Security benefits.
 
You can maximize your benefits by:

1. Working at least 35 years and ensuring you have at least 35 years of earnings to maximize your benefit calculation.
2. Earn more if possible: Higher earnings contribute to a larger benefit amount.
3. Consider delaying claiming until age 70: Waiting to claim benefits until age 70 can significantly increase your monthly payments.
4. If you are eligible, consider claiming spousal benefits based on your spouse’s earnings history.
5. Know retirement earning limits: Be aware of how working during retirement can impact your benefits.
6. Remember, your Social Security benefits play a crucial role in your retirement planning.

 
After reading this section of the book, I checked my wage history and even developed a spreadsheet to see my 35-year average wage history (very nerd-like indeed). From here, I factored in my expected wages over the next several years to see how they will impact this average wage history.
 
I then logged into the Social Security website and on the home pages is a feature where you can see how future expected income through retirement affects your monthly social security payout.
 
To be honest, my expected income did not really move the needle of either my benefit in the future or my average wage base. My wages have been pretty consistent.
 
However, when I did this same exercise for my spouse, I found a different story. Because she was a stay-at-home mom for a number of years, her social security could be greatly influenced by a few changes to our plan.
 
The most obvious is she is now working in a job paying her more than when she was a stay-at-home mom ($0 in wages). Just by working a few additional years raises her wage base and average wage for those 35 years. Strangely enough, my wife did not like that idea since we had previously agreed she will stop working early in a little over a year from now.
 
In fact, it got quite chilly in the room when we discussed working longer!
 
Another option is to earn more. However, this is easier said than done in many cases.
 
I thought of a third option and that is, if you are self-employed, consider adding your spouse to the payroll so she can boost her Social Security wage record.
 
In my case since I am not a fan of additional taxes, I considered paying my spouse my salary and taking no salary. It would boost her wage record and have minimal impact on mine. The problem is I work in a regulated industry, and I could see myself facing possible scrutiny over wages, work, and licensing (i.e., she is drawing wages and is not a licensed adviser).
 
I ultimately decided to leave well enough and just hope my spouse finds some kind of part-time paying gig that might push her Social Security wage record up further before she reaches her full retirement age (FRA) at 67.
 
Let me quickly demonstrate the math here. Let us suppose your social security record says that based on your current wage record you will receive a benefit of $1,982 at your FRA. However, by raising your wages or working longer before retiring, the SSA projects your benefit can increase to $2,039 per month at your FRA.
 
You might say “who cares, that is just $57 more per month. That does not move the needle, Jeff.
 
However, I want to point out that that $57 per month over an estimated 23 years (to age 90) at 8% (what the SSA pays you in extra benefits for delaying) totals to more than $44,957.67 in extra benefits over that hypothetical period.
 
That in my opinion is real money and worth exploring!
 
Let us know how we can help you.