Social Security Retirement Benefits are critical to retirement income planning, in fact, when to elect Social Security may be the most important decision of your retirement. This one decision can impact your retirement by tens of thousands of dollars!
Read Part 1 of The Truth About Your Social Security Retirement Benefits
Social Security Retirement Benefits were NOT designed to replace pre-retirement income. In general, Social Security accounts for about 35% to 40% of the retirement income meaning 60% to 65% will have to come from other sources. Regardless of how big or small a part Social Security plays, its role is critically important, and receiving the maximum possible benefit is paramount for retirement income planning.
In addition to the Social Security income shortfall, there is also a wide knowledge gap and most people are uneducated on how Social Security works and how their decisions regarding their benefit can impact their overall financial wellness during.
A study from the Michigan Retirement Research Center at the University of Michigan showed that:
-Only 48% of people responded correctly when asked the earliest possible age to claim Social Security retirement benefits (age 62)
- And only 23% correctly responded when asked the maximum age to claim Social Security benefits (age 70).
Some of the basics for understanding your options include:
-Primary insurance amount and how is it determined
- Individual Benefit, Spousal Benefit, Survivor Benefit
-Cost of Living increases (COLA)
-Determining when to elect or not to elect
-Reduced benefits or guaranteed growth
-Income tax considerations
-Special provisions that may increase your benefit
These items are extremely important. In working with couples and conducting workshops on “Maximizing your Social Security Benefits”, I’ve seen it first – hand how confusing the Social Security maze can be, I’m grateful to be educating people to make wise decision and getting the most out of their benefits. I cannot stress enough, the importance of being educated on the topic and finding a Certified Financial Planner that is familiar with Social Security Retirement Benefits and the strategies available. Many people mistakenly think they can go to the Social Security Office for advice on when to elect. What they don’t realize is that SSA representatives are actually prohibited from giving election advice; they focus mostly on the monthly benefit amount for an individual, not lifetime income for a family. Often times the SSA representatives do not understand the different strategies well enough to help, or when the various strategies should be used.
Plan for Prosperity
Dano W. LoPresti, CFP®, ChFC®, AIF® is a CERTIFIED FINANCIAL PLANNER™, and Chartered Financial Consultant and Accredited Investment Fiduciary with Legacy Financial Planning in Sandwich, IL. Dano may be reached for questions or comments at 877-786-7851 or by email at firstname.lastname@example.org. Visit his website at www.legacyfp.com. Securities offered through: Triad Advisors Inc.Member. NASD/SIPC