In the book Planning a Secure Retirement chapter 4 is titled “Are You Getting the Social Security You Deserve?” In helping people plan for retirement there are more misunderstandings and mistakes in regard to Social Security. It is a shame because it is a system that is meant to help retirees, not trick them.
Luckily, you do not have to solve the Social Security puzzle alone, nor should you try. You paid into the system, and you should be able to get every penny out of it that you saved. That is where we can help you. Social Security, which is the foundation of your income in retirement, is not something that you can afford to misunderstand. That is why we offer complimentary Social Security workshops where you will learn about the rules of Social Security that you need to know. People can also get a complimentary appointment to come in and get advice on their Social Security filing, regardless of whether they have other assets they want us to manage. We provide this service because we have seen so many people make major, irrevocable Social Security filing mistakes.
This brings us to an important first point: you have 12 months to change your mind about your Social Security filing. If you have already filed, but it is less than 12 months ago, make an appointment with a financial professional today. If you’ve been receiving benefits for less than 12 months, you can change your mind, but be warned: You have to pay back all benefits received since you first filed.
Let’s look at some important rules regarding Social Security.
- The earliest you can file for your Retired Worker’s Benefit is at age 62, unless on disability. However, you will have a 25 percent reduction in your monthly benefit. This reduction stays in place for the rest of your life. Every year that you wait to take your Social Security the penalty is reduced and at your Full Retirement Age (FRA), you will receive 100% of your benefit which is called your Primary Insurance Amount (PIA). If you wait after your FRA, your income “rolls up” 8% every year until age 70 at which time you would receive 132% of your PIA.
- Spousal Benefit. The spousal benefit is available to the spouse of someone who is eligible for Retired Worker Benefits. If the spouse waits until their FRA to file for spousal, then they can get 1/2 of the Retired Worker’s PIA. If the spouse does not wait then their benefit could be as low as 35% of the Retired Workers Benefit.
- Divorced Spouse Benefit. A divorcee can receive benefits on a former spouse’s Social Security if they were married to the former spouse for at least 10 years; is at least age 62; is unmarried; and is not entitled to a higher benefit on their own record. The former spouse must be eligible for benefits (at least 62), but does not have to have filed for benefits.
- Survivorship Benefit. When one spouse passes away, the survivor is able to switch to the larger of the two benefit amounts.
- Annual Earnings Test. If you are considering filing for Social Security before your FRA and continuing to work, you will be subject to the Annual Earnings Test. This means that if you make more than $16,920 in 2017, for every $2 you make over $16,920, you will have to give back $1 of your Social Security. To avoid giving back any of your Social Security, either postpone filing for your Social Security until your FRA, or make less than $16,920.
- Taxes. If you are in the higher tax brackets, then 85% of your Social Security income is subject to your tax bracket. However, if all you have is Social Security income then none of your Social Security would be subject to tax.
- Advice. Many people don’t know that employees of the Social Security are not allowed to offer advice and scenario planning about how and when to file for Social Security Benefits. They are not advisors. An investment advisor can help you determine what is best. They will do scenario planning to help you coordinate your Social Security with taking income from the rest of your assets.
If you would like help building your bridge over the Retirement Cliff, and creating an income plan that will last as long as you do, schedule a complimentary appointment with our advisors Joe LaTour or Jim Margraf. Call today 417-886-5724
Retirement is too important for guesswork.
We look forward to hearing from you!