Social Security Optimization… Getting it right is critical.
The BIG question facing baby boomers is… When should I apply for benefits? One of the best tools for combating the twin retirement risks of inflation and outliving retirement savings may be the one that is most often taken for granted. Social Security is inflation-adjusted and guaranteed for a lifetime. Unfortunately, most Americans are not using Social Security to its greatest potential. Eight out of 10 retirees start taking partial Social Security benefits before reaching full retirement age, currently age 66 for new retirees. Unfortunately, taking benefits early establishes a lower baseline for all payments going forward. That means even after cost-of-living adjustments, monthly payments will never be as high as they would be if a client had waited until age 66. What’s more, every year a client delays the start of benefits further increases the eventual monthly benefit until he or she reaches age 70.
Why do 7 out of 10 Americans file early?Over the next 18 years, some 77 million baby boomers will turn age 62 at the rate of about 10,000 per day. With the percentage of Boomers who are without a qualified pension plan to supplement their retirement income, it’s even more critical for boomers to understand their best strategy for when and how to maximize their Social Security Benefit. Better than 80% of the Boomer’s expect to get advice from their Social Security Administration representative when they go to file. Reality is, the Social Security Administration and its employees are not allowed to give you advice or even give you their opinion if they think you are filing incorrectly… and most advisors haven’t spent the time to fully understand this critical aspect of your retirement income. At any of the Barnowski Financial Group locations, our services begin by first providing expert complimentary Social Security Benefit Income Optimization advice. One of the most daunting topics retirees face today is solving the Social Security riddle. The bottom line is that Social Security is very complex and there are few, if any, rules of thumb that apply to everyone. We eliminate the potential for misunderstanding and prepare our client for their interaction with the Social Security Administration leaving them confident that they are timing their benefit perfectly to maximize their income.
Common Mistakes Boomers Make….
- Filing for Benefits Too Early: Although a person can begin receiving Social Security benefits at age 62, this is generally not a wise move, barring extreme financial or medical hardship. There is often a significant difference between early Social Security benefits and the amount you can receive at retirement age or beyond, as benefits that are cashed in early are only worth a fraction of what you have earned. In addition, once you have applied for benefits, the rate becomes fixed and can only be increased by an estimated cost of living adjustment. Conversely, filing for Social Security after your full retirement age nets you an additional percentage for each year you wait, which provides a much more favorable return than most other investment strategies could.
- Following the Advice of Non-Experts: Well-meaning friends and family may try to convince you to pursue certain avenues for retirement, but you must remind yourself that it is easy to know what to do when someone else’s money is at stake. Your best course of action is to seek out a financial expert who specializes in Social Security planning with in-depth knowledge of benefits optimization. This will ensure that you can get the most out of your benefits, striking the ideal balance between the amount of money you receive and the amount of time you must wait for it.
- Employing an advisor who is not fluent in Social Security Optimization and retirement income planning.