You have a wide range of options when it comes to accessing your Social Security retirement benefits. In fact, single individuals typically have 3 filing options, married couples have 8, and most survivors have 4. How and when you file impacts the amount of money you’ll receive each month as well as the projected value of your lifetime benefit. With so many options available, it is important to plan appropriately before submitting your application.
More and more people are enrolling in early retirement because they are worried about the future of the Social Security program. But taking early retirement benefits can cost you hundreds of dollars per month in lost income opportunities. Listed below are three essential factors to think about before throwing away a hefty portion of the benefits you worked for.
How Income Effects Social Security Retirement Benefits
How much do you currently earn in wages per month? What percentage of that do you spend on bills or other debts? The Social Security program was not designed to replace all of your earned income. It is a supplemental program, which means it should accompany other retirement assets like pension plans and savings accounts. In other words, you should not expect to quit your current job and rely on Social Security to make up the difference. Calculate your current debt obligations and compare that to your projected benefits before making any hasty decisions.
Health Insurance Until Your Retirement
If you are receiving health insurance through your current employer then I strongly recommend you maintain your employment until age 65. You will not be able to receive Medicare insurance benefits until the age of 65, even if you are receiving early retirement benefits. So if you leave a corporate health plan before turning 65, it becomes your responsibility to cover 100% of your health care bills. Of course you can enroll in an independent program, but the costs of insuring an individual or couple in their sixties will likely cost you thousands of dollars per month. Expenses at this level far outweigh the monthly income provided by Social Security.
Keep in mind that the benefit reductions applied to early retirement recipients (30% of full retirement benefits) also apply to your spousal benefits. Thus, not only will you receive less income per month today, but the reduced income will carry on to your spouse even after you have passed away. Make sure your spouse has the means to pay the bills in the event of an unexpected death. The average lifespan in the United States is 78 years, or 13 retirement years after age 65. Do you have enough money to cover this time period?
I see a lot of chatter on the internet about taking Social Security “while it is still there.” I don’t recommend basing your financial planning decisions on this hearsay. Our government would be foolish to let the program wither away as this would instantaneously create a huge spike of poverty in the senior citizen demographic. While we will likely see some tax code adjustments to reinforce the basis of Social Security, it is much more important for you to make decisions based on your own retirement income needs.
About the Author: Jim Blair is a former Social Security branch manager who offers consulting services to retirees. Read more of his Social Security strategies for retirement at SocialSecurityRetirementGuide.com.
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