Filing for Social Security may be one of the most important decisions you make going into retirement. Walk through these 3 steps as you make one of your biggest retirement decisions.
1. Focus on your lifetime income, not your next month’s income. After a lifetime of saving, people often try to preserve their retirement money by waiting as long as they can to take it out.
This is why turning to Social Security is so tempting – it feels like ‘free money’ because you don’t have to take as much initially from your retirement savings. While that first few years of retirement might feel easier when you have Social Security coming in right away, imagine how much nicer it would feel to have a larger, consistent Social Security check coming in each month for the remainder of your lifetime.
Take the long view when starting Social Security. It’s not about making the first few years of retirement easier but helping you keep a consistent income over your entire lifetime.
2. Increase ‘our income’ not just ‘my income.’ So many couples look at their Social Security decisions as their own, thinking “How do I get the most out of this?” Social Security is not just a way to get a ‘return’ on the taxes you paid. It is also a way to help you and your spouse stay financially secure later in life.
If you are the spouse with the higher benefit, your filing date will affect both your benefit and the future widow’s benefit (which just might be yourself!). Wise planning may mean waiting to file so that you can better protect the potential widowed spouse. Your choice on when to file could boost the survivor’s benefit by up to 87%!
Keep in mind Social Security is not just about you today, it is about both of you throughout your retirement, even when there is just one spouse left.
3. Know your longevity odds. A lot of people, men especially, hit 62 and believe they should take Social Security because “what are the odds I’ll live roughly 15 more years to make waiting worthwhile?” I have yet to meet one person who asks that question and has actually looked up the odds!
Well, here it is: for a 62-year-old nonsmoking couple, the husband has a 78% chance of making it those 15 years, and the wife has 85% odds. What’s more important is that the odds of one of those spouses being alive in 15 years is 97%!
When this couple asks, “What are the odds?” questioning whether delaying the higher benefit is worthwhile, the answer is actually 97%!
Before you file for Social Security, know all the important factors. Your personal life expectancy is one of the most important factors to know.
There’s no easy answer to finding the best time to file for Social Security, and there’s no rule that applies to every situation. But when you follow these 3 steps, you are more likely to make a wise decision that will help you and your spouse today and in the future.
Jeremy Keil, CFP®, CFA is a retirement-focused financial planner with Keil Financial Partners and host of the Retirement Revealed blog and podcast.