Do your homework before you fill out your Social Security application.
If you're reading this, that first point may seem redundant. However, many people think that the representatives at the Social Security office exist to help them get the maximum amount of Social Security benefit and all they need to do is go in and talk to someone. That's just not the case.
At Merit Advisors, we have a Social Security specialist. His name is Jason. A few years ago, Jason realized that there was a desperate need to help others navigate the complexities of filing for their Social Security benefits.
What brought this need to his attention? His parents.
When Jason's parents decided to retire, he was invited to accompany them to their upcoming appointment with the Social Security office. Because he was already a thoughtful advisor, he began to do a great deal of research on the different filing options that were available for his parent's situation. Armed with his research and calculations, Jason and his parents went to the appointment.
Once they were in the office, he noticed that, although the representative was very kind and knowledgeable about what forms his parents would need to file, she didn’t offer them any specific strategies to calculate benefits any differently than the few “normal” options. He ended up questioning the representative about specific strategies that he had discovered would help his parents get a different calculated benefit.
The representative did the calculations he had requested and the numbers that showed up with the new calculations were much different than the number the “normal” calculations had produced.
Because he had done his research, he was able to help his parents maximize their Social Security benefit as well as increase his mother’s survivor benefit.
The truth is, the good people at the Social Security office can’t give you specific advice on which strategy is best for you, what age you or your spouse should file to get the most benefits, or do any high-level planning with you. They can answer basic questions about Social Security and how to claim it, but that’s about it.
Jason brought back to our practice a realization that even many financial advisors don’t have a full understanding of how Social Security works or how it can become a greater asset for their clients if they get some extra education.
That being the case, the very first thing we recommend is to meet with a financial advisor who has had some extra training in Social Security Benefits (like our very own Jason Parrish), or do some very thorough research before the day of your appointment.
Understand Your FRA (Full Retirement Age)
As always, before I get into some specific numbers, I want to say that this blog is purely educational and is designed to assist you in exploring a couple of strategies to maximize social security. The information presented is factual, but since everyone's situation is different, this is not intended to be specific advice.
That said, did you realized that there are roughly 500 different ways a married couple can file for Social Security right now?
Filing for Social Security can be incredibly confusing.
But it doesn’t have to be.
1. You need to understand that the government calculates your benefits based off of a number called the Full Retirement Age or FRA. The exact time you claim will determine the amount of benefits you will receive. If you claim your benefits at age 62, your benefits will be reduced by 25%-30% depending upon the year you were born.
This reduction is determined by a calculation that works backwards from your FRA.
For each month you file before FRA, up to 36 months you would reduce your benefit by 5/9% (0.5555555%) per month or 6.67% per year.
Formula (5/9 x # of months) Example: 5/9 x 36 = 19.99%
In excess of 36 months, you would reduce your benefit by 5/12% (0.4166666) per month or 5% per year.
Formula (5/12 x # of months) Example: 5/12 x 24 = 9.99%
At your FRA, you are entitled to 100% of your benefit.
However, if you wait just 3-4 years longer, you could receive as much as 132% of your full benefit. That’s 2/3% per month or 8% increase each year up to age 70.
Find strategies that help you delay starting your claim.
You also need to wait until you are truly ready to be done working to claim Social Security benefits.
In 2020, if you worked into retirement and were between the ages 62 and your FRA, there was a reduction of $1 of benefits for every $2 you earned above $18,240.
If you work into retirement in the year you turn FRA up to your birthday, there is a reduction of $1 of benefits for every $3 you earn above $48,600.
Make sure you know what it will cost you to keep working after filing for Social Security.
Many people claim social security at 62 because they believe they are ready to retire, and once they begin to get their monthly check, they realize they need more income and go back to work. It’s important to have an idea of what your social security benefits will be before you decide to retire and have a working budget.
There are quite a few more strategies you can utilize to maximize your social security benefit and if you'd like to discuss this in person, please contact Jason to set up a complimentary appointment where he'll run a Social Security Maximization Report for you.
This report calculates the single best way to maximize your benefits.
It then calculates your protected income number; which is the base level of income you need to cover your essential expenses.
We can show you what your retirement probability of success is based on your current financial plan. This consult would be free and wouldn’t require any commitment for working with Merit Advisors.
If that sounds like something you’d be interested in, give our office a call at (614) 686-3748.