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Per the Nationwide Financial survey released last Wednesday (June 4th), 38% of retirees who claimed Social Security benefits before full retirement age now regret their decision and wish they had waited as it would have resulted in a larger monthly payment that many Baby Boomers need. This is even more important today with both costs of living rising and that with Boomers living longer than expected.
Many Boomers feel that they need to get the benefits now as they may not be available later, however that choice (or fear) may result in less than an optimal result.
Although, eligible participants can claim Social Security benefits as early as 62, their benefits are permanently reduced by 25% compared to waiting until their full retirement age of 66 to begin benefits. Those who are willing to wait even longer earn delayed retirement credits worth 8% per year for every year they postpone benefits up to 70, increasing their benefits by an additional 32%. In addition to that, if Social Security beneficiaries continue to work prior to full retirement age, some or all of their benefits can be withheld.
In our financial planning process at STA Wealth, we have noted that when and how to claim Social Security is one of the most important financial decisions many retirees make in their lifetimes. During our planning process, we employ software tools that look at various scenarios to assist our financial planning clients in optimizing their Social Security benefits as part of their holistic retirement plan.
Those who don’t take steps to maximize their benefits may be missing out on thousands of dollars per year in additional income. For a married couple, the right Social Security claiming decision can increase their lifetime benefits by $100,000 or more.
Here are some of the other scenarios that need to be considered when considering when and how to begin your benefits:
Financial Planning and Investment Advice offered through STA Wealth Management (STA), a registered investment advisor.
STA does not provide tax or legal advice and the information presented here is not specific to any individual’s personal circumstances. To the extent that this material concerns tax matters or legal issues, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.
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