Social Security Risk

Choosing Wisely

Social Security is an essential financial program that helps many Americans. It provides benefits to retired people, disabled individuals, and the families of retired, disabled, and deceased workers. Here is how it works: today’s workers pay Social Security taxes, and that money is used to give monthly income to recent Social Security recipients.  

Regarding retirement, the three primary sources of income are Social Security, pensions, and retirement savings. However, today many people approaching retirement may have only some of these three sources of income, which makes it even more important to make wise decisions about our retirement savings and Social Security.  

We each have a specific age to receive our Social Security retirement benefits, depending on the year we were born. For example, if you were born between 1943 and 1954, your full retirement age is 66. If you were born after 1954, your full retirement age could be as late as 67. But you can start collecting Social Security benefits earlier, at age 62, or you can delay receiving benefits until age 70. Deciding when to begin receiving benefits is an important decision because it will affect how much money you will receive from Social Security.  

When to File for Retirement

To determine when to file for retirement, let’s look at an example. Mark and Olivia will reach full retirement age at 66, and their full retirement benefit is $2,000 monthly. Mark decides to start taking benefits as soon as possible, at age 62. Because he’s starting four years earlier than his full retirement age, his benefit will be reduced by 25%. So instead of $2,000, he’ll receive only $1,500 monthly. On the other hand, Olivia plans to wait until age 70 to file for benefits. By waiting, she will receive delayed retirement credits, which increase her benefit by 8% for each year she remains past her full age. Her benefit at age 70 will be $2,640 per month, 32% more than she would have received at age 66. If Mark and Olivia lived until age 90, Olivia would have received $130,000 more in total benefits than Mark.  

One of the factors affecting your Social Security benefits is deciding when to file. Your and your spouse’s health, whether you plan to work before reaching full retirement age, how your benefits will be taxed, and whether you have other sources of income to draw from for retirement are all important things to consider.  

A financial professional can help you understand how a fixed index annuity can enhance your Social Security benefits. If you need guidance on creating a more comprehensive retirement income plan, contact us to start building a better financial future. 

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