Social Security Administration benefits are an enormous part of many Americans’ retirement income plan. So, the decision around when to take those benefits is super important! This one choice can determine how your cash flow in retirement years sustain your ability to remain financially solvent, particularly during a year of high-inflation and if cost-of-living adjustments – the element of Social Security benefits that allow the payout to increase commensurately with inflation, is paused. For reference, this increase pause has occurred as recently as 2009, 2010, 2011, and 2016, respectively, according to the Social Security Administration.
What’s worse, is that an alarming percentage of the U.S. population – roughly 40% - will rely on Social Security as their only source of income, according to a study in 2020 from the National Institute on Retirement Security.
The first option to choose regular Social Security income payments would be upon attaining Age 62. In electing to take your awarded monthly benefit early, you’d take a dramatic “haircut” on your payout for the rest of your life, aside from additional variables related to your specific situation which typically involves returning to the job force. This measure is referred to as suspending benefits and then accumulating delayed retirement credits with the intention of restarting benefits at a later age for a higher payout.
Full Retirement Age (FRA), which is when your attained age allows you to meet requirements to take your full monthly award amount without a reduction, is what most retirees should shoot for if they have other assets to fall back on between the ages of early retirement election, Age 62, and reaching FRA. In my opinion, except for those in a less than favorable financial situation or those that have a current sickness or high probability of low life expectancy, is to plan to wait until beyond FRA to receive benefits, with Age 70 being the maximum deferral age in any scenario, and the most handsome payout to you.
What can be great about Social Security benefit deferment, is that each year you wait, and unlike the Administration’s ability to withhold cost of living adjustments at their discretion (obviously, to your detriment), you could receive a guaranteed increase of 8% each year for a maximum increased adjustment of your overall payment for life of up to 24%*! That size of an increase could prove to be very impactful over the course of your life!
You see, other than for the reasons mentioned above for early benefit elections, Social Security election decisions around when to take benefits should be based on longevity and financial stability as a broad-based approach to your overall financial picture. Only after a detailed thought process should such an important choice be made that has long-lasting effects for both you, your spouse, and possibly even your child(ren). After all, your decision, is the decision of a lifetime!
For questions or clarification on the above information, detailed questions about ages of election, awarded benefit entitlements or to explore further benefits, we recommend consulting a financial advisor and CPA or accountant, and contacting the Social Security Administration directly.
* FRA and the cost-of-living adjustments mentioned above are referring to those born in 1960 or later. For reference, those born in 1954 or earlier have a FRA of 66, whereas those born in later years are as follows: 1955 (66 years and 2 months), 1956 (66 years and 4 months), 1957 (66 years and 6 months), 1958 (66 years and 8 months), and 1959 (66 years and 10 months). Additionally, if a retiree who was born in 1954 had a FRA age of 66, with their longest deferral age being Age 70, they’d enjoy a 32% increase in lifetime benefits by delaying for four years beyond Age 66.
Registered Representative and Financial Advisor of Park Avenue Securities LLC (PAS). OSJ: 5280 CARROLL CANYON ROAD, SUITE 300, SAN DIEGO CA, 92121, 619-6846400. Securities products and advisory services offered through PAS, member FINRA, SIPC. Financial Representative of The Guardian Life Insurance Company of America® (Guardian), New York, NY. PAS is a wholly owned subsidiary of Guardian. WestPac Wealth Partners LLC is not an affiliate or subsidiary of PAS or Guardian. Insurance products offered through WestPac Wealth Partners and Insurance Services, LLC, a DBA of WestPac Wealth Partners, LLC. CA Insurance License Number - 0G14394. | Guardian, its subsidiaries, agents, and employees do not provide tax, legal, or accounting advice. Consult your tax, legal, or accounting professional regarding your individual situation. | The Social Security Administration has not approved, endorsed, or authorized this material. Contact the Social Security Administration for complete details regarding eligibility for benefits. | 7853716.1 Exp. 04/27