Unlocking the Full Potential of Social Security in Retirement
By Lindsay Adams, CFP®
Social Security can be a crucial income source in retirement, and a carefully planned Social Security strategy can make a big difference in maximizing your retirement income strategy. Some strategy considerations could include: postponing your claim, strategically selecting spousal or survivor benefits, and staying current with Social Security policies.
In this article, I’ve gathered practical tips and insights to help you make sense of Social Security options. My goal is to give you the knowledge you need to confidently decide what works best for your situation and maximize the benefits available to you.
Three-Legged Stool for Retirement
Let’s start with a simple explanation of how most retirement plans are structured.
There are typically three key elements in most retirement income plans: Social Security, pension benefits, and withdrawals from savings. If retirement were compared to a stool, these three elements would serve as the legs supporting the seat.
Having all three components is ideal, but it’s not always feasible. Pensions are becoming increasingly rare as employers move toward different types of deferred compensation, and only about 21% of Americans retire with pension benefits. Another report indicates that only 7% retire with all three sources of retirement income.
If you are one of the many Americans who cannot depend on all three sources, Social Security becomes an even more vital component of your retirement strategy.
How to Make the Right Claiming Decision
Because your understanding of how to optimize Social Security can be such an essential part of your retirement strategy, it’s crucial to plan ahead and fully grasp the factors that affect your retirement income.
Timing for Claiming Your Benefits
You can start claiming Social Security benefits between the ages of 62 and 70. However, the timing of your claim directly affects the total amount you receive.
For example, if you claim benefits at age 62, your monthly amount is reduced. Conversely, if you wait until your full retirement age, you’re entitled to your full primary insurance amount, which reflects the total benefits earned based on your contributions to the Social Security system.
If you do not require your benefits at that time, you have the option to postpone your claim. For each year you delay your claim past full retirement age, your benefit increases by 8% until it reaches its maximum at age 70.
Timing for Claiming Spousal Benefits
If you qualify to receive spousal benefits, once again, the timing and method of how you do so depends on your individual financial circumstances. Thoroughly evaluate your options as part of your overall plan to optimize Social Security.
Typically benefits for the lower earner may be taken sooner or at full retirement age while the benefits for the higher earner would begin after age 70. This strategy allows a couple to use up the smaller benefit while allowing the larger one to grow to its maximum value.
Social Security’s Current Status
Regardless of how or when you’re planning to claim your benefits, it’s important to keep up with Social Security’s latest policies. However, complications with the current system make long-term projections difficult, as the program is currently on track to eventually run out of funds.
The program’s problems include consistently low interest rates, lengthier retirements overall, a large number of beneficiaries, and insufficient employee contributions to the fund. When considered collectively, these elements indicate that the Social Security system is now underfunded and not making enough money to cover its obligations.
One way to stay current with Social Security’s policies is to keep your eye on the “latest news” section near the footer of the Social Security Administration website’s home page.
We’re Here to Help
To determine how Social Security fits into the retirement puzzle, you need to look at all the pieces. A smart way to strategize a big-picture view of your options is to partner with a financial professional.
Our team at CGN Advisors can build a retirement plan for you that integrates all your options. Get started right now and schedule a meeting with us by calling our Manhattan, KS, office at (785) 340-3434 or our Rogers, AR, office at (479) 335-1034.
About Lindsay
Lindsay Adams is a Lead Advisor at CGN Advisors, a Fee-Only, financial advisory firm based in Manhattan, Kansas. She is a CERTIFIED FINANCIAL PLANNER® professional and holds the Certified Farm Succession Coordinator designation. In her role, Lindsay aims to walk alongside her clients as they navigate financial decision-making, and she loves seeing them accomplish their goals with actionable steps and experience the financial freedom to do what their heart desires. With a mission to serve others, she genuinely cares about what goes on in her clients’ lives, the big and the small, beyond the financial.
Lindsay graduated from the Personal Financial Planning program at Kansas State University with a minor in business. Prior to joining CGN as an Associate Advisor, Lindsay gained experience in different aspects of the financial services industry. She worked in banking during high school and college and helped fellow students at a financial counseling on-campus job, which showed her many different ways people interact with money and spurred a desire to assist others in financial planning. Outside of work, Lindsay is active in her church, enjoys singing and being outside, whether running or hiking, and spending time on the farm. She’s always looking forward to the next travel adventure. To learn more about Lindsay, connect with her on LinkedIn.
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