Kevin Taylor’s guest speaker, Angela Gantt with BlackRock, explained some of the considerations that need to be weighed when deciding when to take Social Security as part of a retirement strategy.
BlackRock is a money manager out of New York whose clients include governments and institutions, as well as individuals. As an investment consultant, they help clients prepare for retirement and Social Security is an important part of retirement cash flow. They hired seasoned people from the SSA to help create a presentation for their clients to help simplify the issues around Social Security and to help clients determine when they should take their benefits.
Social Security was created in the 1930’s and a lot has changed since then, such as life expectancy. Currently, couples age 65 have a 50% chance that at least one of them will live to 93 and a 25% chance that at least one of them will live to 98! Yet, currently, 75% of people are taking the reduced benefit to collect Social Security early. It doesn’t mean it is the wrong decision for you, but when you take benefits early, they are reduced permanently. It is important to understand the rules before making decisions about when to take this income. There are many Social Security calculators available for the individual, but the BlackRock calculator considers the household not just the individual.
To receive individual benefits, you must have 40 credits, which are earned quarterly, so you must have worked and paid into Social Security for at least 10 years. Benefits are calculated on the best 35 years in indexed dollars. Log in to www.ssa.gov to make sure your reporting is correct and see what they anticipate your benefits will be. Their estimate will assume you continue to work until Full Retirement Age (FRA), but will allow you to change the figures to get a better estimate of your full-retirement benefit, a higher benefit for delaying (8%/year through age 70), as well as early benefits at a reduced amount.
Full Retirement Age (FRA) depends on when you were born. It is 65 if you were born 1937 or earlier, 66 if born 1943 – 1954 (plus 2 months for each year after that) or 67 for those born in 1960 or later. If your FRA is 66, you receive 75% of your benefits if you start taking them at 62, 80% if taken at 63, 87% if taken at 64, and 93% if taken at 65.
When evaluating whether to take Social Security early, consider whether you plan to work, your expected longevity, and your spouse. If you take benefits early, there is an earning limit (wages only) before FRA and some of your benefits will be withheld, depending on how much you earn. Once you reach, FRA, there is no earning limit. If longevity runs in your family, it may not be advantageous to take benefits early.
If you take benefits early, you might be able to change your mind if you apply for the change within the first 12 months and it is approved. If you take early benefits longer than 12 months, the reduced benefit is permanent. As of 2017, spousal benefits cannot be taken until the worker is taking benefits. The reduction for taking early spousal benefits is 30%. Once you reach full retirement age, there is no additional benefit to delay receiving spousal benefits, so you should take it then. If you are divorced and were married at least 10 years, you basically have access to the divorced spouses’ benefits as a spousal benefit, though there are additional rules.
BlackRock does not charge you for information from their Social Security calculator. If you have any questions concerning Social Security or Medicare, just let Kevin Taylor know and he can get answers from the experts in writing!