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Social Security

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By Michael Christodoulou

One of your important sources of retirement income will likely be Social Security — but when should you start taking it?

You can start collecting Social Security benefits at 62, but your checks will be considerably bigger if you wait until your full retirement age, which is likely between 66 and 67. You could even wait until you’re 70, at which point the payments will max out, except for yearly cost-of-living adjustments. But if you need the money, you need the money, even if you’re just 62 or any age before full retirement age. 

However, if you have adequate financial resources to meet your monthly needs, whether through earned income, your investment portfolio or a combination of the two, you could have some flexibility in choosing when to take Social Security. In this case, you may want to weigh these considerations:

Life expectancy: For all of us, it’s one of life’s great mysteries: How long will we live? Of course, we can’t see into the future, so the question can’t be answered with total confidence. But to make an informed decision on when to take Social Security, you don’t need to know your exact lifespan — you just need to make a reasonably good estimate. 

So, for example, if you’re approaching 62, you’re enjoying excellent health and you have a family history of longevity, you might conclude it’s worth waiting a few years to collect Social Security, so you can receive the bigger payments. Conversely, if your health is questionable and your family has not been fortunate in terms of longevity, you might want to start taking your benefits earlier. 

Employment: You can certainly continue working and still receive Social Security benefits. However, if you’re under your full retirement age for the entire year, Social Security will deduct $1 from your benefits for every $2 you earn above the annual limit of $22,320. In the year you reach your full retirement age, Social Security will deduct $1 in benefits for every $3 you earn above $59,520. So, you may want to keep these reductions in mind when deciding when to begin accepting benefits. Once you reach your full retirement age, you can earn any amount without losing benefits. (Also, at your full retirement age, Social Security will recalculate your benefit amount to credit you for the months you received reduced benefits because of your excess earnings.)

Spouse: Spouses can receive two types of Social Security benefits: spousal and survivor. With a spousal benefit, your spouse can receive up to 50% of your full retirement benefits, regardless of when you start taking them. (Your spouse’s benefit can be reduced by the amount of their own retirement benefit and whether they took Social Security before their full retirement age.) But with a survivor benefit, your decision about when to take Social Security can make a big difference. 

A surviving spouse can receive the larger of their own benefit or 100% of a deceased spouse’s benefit, so if you take benefits early and receive a permanent reduction, your spouse’s survivor benefit may also be reduced for their lifetime. 

When to take Social Security is an important — and irrevocable — decision. So, consider all the factors before making your choice. 

Michael Christodoulou, ChFC®, AAMS®, CRPC®, CRPS® is a Financial Advisor for Edward Jones in Stony Brook. Edward Jones, Member SIPC

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By Michael Christodoulou

Michael Christodoulou
Michael Christodoulou

Here is something to think about: You could spend two, or even three, decades in retirement. To meet your income needs for all those years, you’ll generally need a sizable amount of retirement assets. How will Social Security fit into the picture?

For most people, Social Security won’t be enough to cover the cost of living in retirement. Nonetheless, Social Security benefits are still valuable, so you’ll want to do whatever you can to maximize them.

Your first move is to determine when you should start taking Social Security. You can begin collecting benefits when you reach 62 – but should you? If you were to turn 62 this year, your payments would only be about 71% of what you’d get if you waited until your full retirement age, which is 66 years and 10 months. (“Full retirement age” varies, depending on when you were born, but for most people today, it will be between 66 and 67.) Every month you wait between now and your full retirement age, your benefits will increase. If you still want to delay taking benefits beyond your full retirement age, your payments will increase by 8% each year, until you’re 70, when they “max out.”  Regardless of when you file, you’ll also receive an annual cost-of-living adjustment.    

So, when should you start claiming your benefits? There’s no one “right” answer for everyone. If you turn 62 and you need the money, your choice might be made for you. But if you have sufficient income from other sources, you’re in good health and you have longevity in your family, or you’re still working, it might be worthwhile to wait until your full retirement age, or perhaps even longer, to start collecting.

Another key consideration is spousal benefits. If your own full retirement benefit is less than 50% of your spouse’s full retirement benefit, you would generally be eligible to claim spousal benefits, provided you’re at least 62 and your spouse has filed for Social Security benefits.

Survivor benefits are another important consideration. When you pass away, your spouse would be able to receive up to 100% of your benefit or his/her own retirement benefit, whichever is higher. Thus, delaying Social Security could not only increase your own benefit, but also the benefit for your surviving spouse.

An additional issue to think about, when planning for how Social Security fits into your retirement, is your earned income. If you’re younger than full retirement age, your benefit will be reduced by $1 for each $2 you earn above a certain amount, which, in 2021, is $18,960. During the year you reach full retirement age, your benefit will be reduced by $1 for each $3 you earn above a set amount ($50,520 in 2021). But once you hit the month at which you attain full retirement age, and from that point on, you can keep all of your benefits, no matter how much you earn (although your benefits could still be taxed).

One final point to keep in mind: The more you accumulate in your other retirement accounts, such as your IRA and 401(k) or similar employer-sponsored plan, the more flexibility you’ll have in managing your Social Security benefits. So, throughout your working years, try to contribute as much as you can afford to these plans.

Michael Christodoulou, ChFC®, AAMS®, CRPC®, CRPS® is a Financial Advisor for Edward Jones in Stony Brook. Member SIPC.

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By Michael R. Sceiford

If you’re married and nearing retirement, you’ll want to review how Social Security claiming strategies for spouses are changing. Two popular spousal strategies known as File and Suspend and Restricted Application will be going away for most individuals. Here’s what you need to know:

File and Suspend
How it works: Let’s say Robert has reached his full retirement age (FRA) according to the Social Security Administration, and his wife, Judy, is ready to claim her spousal benefits. Robert could file for benefits but then suspend receiving them. Judy could begin receiving Social Security spousal benefits while Robert’s benefit would continue to grow.
What’s changing: If Robert suspends his benefit, Judy’s spousal benefit will also be suspended.
What this means for you: You can’t suspend your benefit without also suspending any benefit based on your benefit, such as the spousal benefit. However, if you’ve already set up this strategy, you can continue to use it. If you have reached your FRA and are considering File and Suspend, you must do so before April 30, 2016.

Restricted Application
How it works: In this example, Judy reaches her FRA but chooses to take the spousal benefit instead of her own (assuming Robert has already filed for his benefits). This would allow Judy’s benefit to continue to grow while she receives the spousal benefit.
What’s changing: Judy can no longer choose which benefit she wants to receive. She will automatically receive her own benefit first and then the spousal benefit if she is eligible.
What this means for you: If you were born after 1953 and delay filing for your own benefit past your FRA, you can no longer get the spousal benefit in the interim. That said, those born in 1953 or earlier still have this strategy available.

No COLA in 2016
One thing that is not changing this year is the cost of living adjustment (COLA) for Social Security benefits. Because the inflation rate for 2015 was 0 percent, those who are already receiving Social Security will see no change to their benefit level in 2016.

When you decide to file for benefits involves a number of factors, including your life expectancy, if you plan to continue working, if you need the money to support your retirement and the effect on your spouse. Before making any decisions, consult with your qualified tax advisor. Your financial advisor can then work with you to see how Social Security filing strategy and your investments fit together within your overall retirement income picture.

Michael R. Sceiford is an Edward Jones financial advisor in Port Jefferson.

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By Nancy Burner

Retirement can be an exciting new chapter in someone’s life, but it can also be stressful. The change of lifestyle and income source can lead to anxiety for many individuals reaching retirement. There may be a fear that there is not sufficient income to meet monthly needs or sufficient resources to last the remainder of his or her life.

The reality is that people are living longer and require stable income to meet their daily expenses. A person can maximize benefits and income while preserving assets for the next generation provided that the proper planning has been put into place.

One key strategy in planning for retirement income is maximizing your benefit under the Social Security system. Social Security income will play a major role in monthly income for many retired seniors and should not be overlooked or ignored. Knowing the appropriate time to start taking the benefit will impact the amount of income a person will receive.  “Full retirement age” will depend on when the individual was born.

For those born in 1954 or before, the full retirement age is 66 years old. For those born after 1954 but prior to 1960, the full retirement age gradually rises a few months at a time. For example, someone born in 1957 has a full retirement age of 66 years and 6 months. Anyone born in 1960 and later has a full retirement age of 67 years old.

Taking Social Security prior to the “full retirement age” can result in reduction penalties that could potentially cost the individual almost half of what might have been earned if the individual had waited. Once a person reaches “full retirement age,” it may be advantageous to wait a few years longer until 70 years old to begin collecting Social Security. Unfortunately, the only way to determine if waiting until age 70 is beneficial would be to know how long you are going to live.

Social Security Administration determines your benefit based on the average life expectancy. If the person outlives the average life expectancy, then it was a better choice to wait until 70 to begin the benefit. Nevertheless, no one knows how long they will live, but the reality is that people are living longer and it is essential to make sure you have sufficient income to support your daily needs regardless of how long you live.

It may be much easier said than done to wait to take Social Security. In a perfect world, everyone could wait until the perfect age to start taking Social Security in order to maximize their benefit. The reality may be that income is needed sooner than the ideal age. In this circumstance, there are several tactics that can be used in order to get income, but preserve your Social Security income and allow it to grow until you reach 70 years old.

It is essential to understand that a person may be entitled to Social Security benefits based on a spouse, ex-spouse, deceased spouse or deceased ex-spouse’s earning record. Once a person reaches “full retirement age,” but has not reached age 70, it may be advantageous to use a restricted application and apply only to claim a spousal (or ex-spousal) benefit and wait until 70 to collect your own benefit. This would enable you to start getting Social Security income, but preserve your benefit to allow for the possibility of a higher income. It is important to consult a professional in your area regarding different tactics that can be used to maximize your retirement benefits.

Retirement should be the time in your life where you can relax. The stress of not having enough income to meet necessary daily expenses can be avoided with having the proper plan in place to meet your income needs and give you peace of mind.

Nancy Burner, Esq. has practiced elder law and estate planning for 25 years. The opinions of columnists are their own. They do not speak for the paper.

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By Jonathan S. Kuttin

As more baby boomers reach retirement age, they’re realizing the valuable role Social Security will play as a source of lifetime income. Claiming Social Security benefits can be far more complex than you may realize. Here are seven essential things about Social Security to understand as you determine how Social Security will fit into your overall retirement income strategy:

You can start claiming benefits any time between ages 62 and 70: When you’re working and paying Social Security taxes (via your paycheck), you earn credit toward your Social Security retirement benefits. To qualify for these benefits, you need to contribute at least 40 credits to the system, which is typically 10 working years (although it does vary). Alternatively, if you have never worked and you’re married to someone who qualifies, you may earn a spousal benefit. When claiming your own benefit, you can begin receiving Social Security at age 62 or delay receiving Social Security up to your 70th birthday.

Full retirement age is changing: The age to qualify for a “full” retirement benefit from Social Security used to be 65. Now it is up to 66 (for those born between 1943 and 1954). It increases by two months per year for those born between 1955 and 1959. For those born in 1960 or later, full retirement age is currently defined as 67.

The longer you wait, the larger your benefit: The amount of your benefit depends on the age you choose to first begin receiving Social Security. For example, if you collect beginning at 62 and your full retirement age is 66, your benefit will be about 25 percent lower. On the flip side, your benefit will increase by about 8 percent each year you delay taking Social Security after your full retirement age up to your 70th birthday.

Spousal benefits give married couples extra flexibility: If both spouses worked, they each can receive benefits based on their own earnings history. However, a lower earning spouse can choose to base a benefit on the higher earning spouse’s income. A spousal benefit equals 50 percent of the other spouse’s benefit. Note that if you claim a spousal benefit before full retirement age, it will be reduced. The maximum spousal benefit you can collect is by taking the benefit at your full retirement age (based on the benefit your spouse would earn at his or her full retirement age).
You also can choose to collect a spousal benefit initially and delay taking your own benefit, allowing your benefit amount to increase. Then you can claim your benefit when you turn 70.

There may be a long-term advantage if a higher earning spouse delays Social Security: If the higher earning spouse is older (or has more health concerns that could affect longevity), it may make sense to delay taking Social Security as long as possible up to age 70. When the spouse with the higher benefit dies, the surviving spouse will collect the higher benefit that was earned by the deceased spouse. The higher the deceased spouse’s benefit, the larger the monthly check for the surviving spouse.

Claiming benefits early while still working can reduce your benefit: If you begin claiming Social Security before your full retirement age but continue to earn income, your Social Security benefit could be reduced. If your earnings are above a certain level ($15,720 in 2015), your Social Security checks will be reduced by $1 for every $2 you earned in income above that threshold. In the year you reach full retirement age, that threshold amount changes. $1 is deducted for every $3 earned above $41,880 up to the month you reach full retirement age. Once you reach full retirement age, you can earn as much income as you want with no reduction in your Social Security benefits.

Benefits you earn may be subject to tax: According to the Social Security Administration, about one-third of people who receive Social Security have to pay income tax on their benefits. You may want to consult a tax professional to determine what impacts this will have on your overall benefits.
These essential points are just a beginning. There’s much more to consider. Consult with your financial advisor, tax professional, your local Social Security office and/or Social Security’s website, www.ssa.gov, to find out more before you make your final decisions about when to first claim Social Security benefits.

Jonathan S. Kuttin is a  private wealth advisor with Kuttin-Metis Wealth Management, a private advisory practice of Ameriprise Financial Services, Inc. in Melville, NY. He specializes in fee-based financial planning and asset management strategies and has been in practice for 19 years.

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