That said, there are sufficient changes surrounding Social Security
in the here and now that justified an update.
Analytical
Tools Multiplying
With
10,000 baby boomers reaching age 65 every day, it’s no surprise that a large
number of tools have started to sprout up promising to help analyze how to
maximize your benefit. These tools vary
in their level of sophistication, but most ultimately come down, as all
financial planning does, to making educated guesses about a number of variables. Despite much of what’s written out there, the
decision as to when to draw social security is often much more than just picking
age 62, 66 or 70.
The
basic rule of thumb is simple. If you
expect to live past age 80 or so, depending on some other factors, it’s best to
wait as long as you can to draw your benefit.
But, that comes with a number of caveats. It’s impossible to touch on them all, but the
biggest gap we see in these tools is the ability to translate what’s best
purely from a Social Security standpoint to how the timing of your benefit impacts
the overall portfolio.
Does
drawing later for a higher benefit cause too much strain on your portfolio in
the early years of retirement? Is giving
in to the emotional pull of starting benefits sooner costing you potentially
hundreds of thousands of dollars in benefits down the road? We have the ability to look at these tools as
they relate to your overall plan and help make that decision about when to turn
on benefits as educated a choice as possible.
No
More Statements
As
you may have heard, an effort to reduce spending on postage, paper and impact
to the environment has led the Administration to cease mailing out annual
statements. In response, they’ve added a
new online offering called “My Social Security”. The program allows you to create your own
login and retrieve the same information reported on your annual statement at
any time. The website can be found here, or we’d be happy to walk you
through the process in our next meeting.
No
More Paybacks
Another
slightly older bit of news that wasn’t very widely covered is the closing of
the “payback” loophole. In the past, you
could elect to start your benefit early and then, at any time before age 70,
“cancel” your election, payback what Social Security had paid you to that point
and then restart your benefit at the new, higher rate. This was essentially an uncollateralized,
non-interest bearing loan from the government.
That option has since been removed and is no longer a tool to use in
determining the best outcome for you and your benefit.
Unintended
Benefits
Stories
continue to emerge about various other Social Security “loopholes” that are
likely to be closed as Congress continues to find every way they can of
extending the program without upsetting the electorate. One story that’s arguable an illustration of
what’s wrong with the system was one I recently came across in Investment News. Dependent children under a certain age are
eligible for benefits of up to ½ the amount of the recipient. This rule was largely intended for parents
receiving Social Security for disability or widow/widowers’ benefits or for
those having to care for dependent grandchildren. The unintended consequence is that, in this
day and age, more and more fathers in their sixties have young children. Until the loophole is addressed, Mary Beth
Franklin of Investment News recommends anyone eligible take the benefit and use
it to fund the child’s 529 plan. She coins
the strategy “The
Viagra College Fund.”
We’ll continue to monitor this and all the topics we cover here
that can have a meaningful impact on your life and financial goals. If you have any questions or wish to discuss
further, don’t hesitate to contact us via the links below.
Thanks and have a great week!
Chip Workman, CFP®
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