Tag Archives: Social Security

3 Reasons Not To Claim Social Security Early

Are you making the right financial choice when it comes to Social Security?

In continuing with our 4 Cornerstones of Retirement, let’s talk about Social Security Planning.

One of the toughest decisions regarding Retirement is trying to figure out when to take your Social Security. Most people can claim as early as age 62, but in doing this you’ll suffer a reduction as much as 30% in the monthly payment you receive if you do so, rather than waiting until your full retirement age. Yet having those benefits available for several extra years is more than enough to entice millions of Americans into taking their Social Security early.

In rare cases, its actually smarter to claim benefits early, but there are also some great reasons why you should consider not claiming your Social Security early. Even if circumstances change and force you into making different decisions when it comes time to retire, knowing why it makes sense to wait can help you plan your entire retirement strategy more effectively, saving you thousands (or millions) of dollars.

 

1. YOU’RE STILL WORKING AND WILL END UP FORFEITING YOUR BENEFITS ANYWAY

The most obvious situation is when you’re still working and making enough money that you’ll have to forfeit whatever you receive in Social Security benefits. The Social Security Administration has strict rules that force you to give up what you get from Social Security if your income is above certain limits.

Specifically, if you make more than $17.040 in 2018 and won’t reach your full retirement age during the year, you’ll have to give up $1 in benefits for every $2 you make above the threshold.

But this isn’t as bad as it sounds, because in exchange for forfeiting benefits, the SSA treats it as if you had just waited to claim benefits later. So if you lost a whole year’s worth of benefits, you’d get the same amount later that you would have gotten if you’d waited an extra year before claiming.

 

2. YOU WANT TO LEAVE YOUR FAMILY THE MOST BENEFITS POSSIBLE

While many people decide when to claim Social Security based on their own expectations, it’s not just your benefits that will suffer if you claim early.

“Survivor Benefits” for spouses and children are determined, in part, by when you claim your primary retirement benefits. If you claim early, then the lower monthly payments you get will also be reflected in what your family receives after you pass away.

Whether the survivor benefits are important depends on your family situation. If your spouse works and will have their own benefits, survivor benefits aren’t as big of a deal. But for single-earner families, or those who have disabled children who will be eligible for benefits, waiting to claim can have a HUGE influence on their financial futures.

 

3. YOUR TAX SITUATION MIGHT WANT YOU TO WAIT

Many people don’t realize that Social Security benefits can be taxable if you make over a certain amount. In some cases, claiming early makes it more likely that your benefits will be taxable. The most common scenario is for married couples who file jointly, when one spouse is still working. Even if it’s your spouse and not you who brings in the cash, they still count towards that threshold.

 

BOTTOM LINE: BE SMART WITH SOCIAL SECURITY

Deciding when you take Social Security is one of the toughest choices you’ll have to make financially. If you’re aware of the pros and cons for and against claiming early, you’ll be in a much better position to make an informed and educated decision.

Contact Doug or his team at Maximum Wealth to receive a personalized detail analysis and options about which Social Security choice works best for you and your family!