Editor’s Note: The team at Gunnip & Company CPAs sponsored an event earlier this year that allowed individuals and couples to meet with representatives from Prudential Financial. Information provided by James R. Seslor Jr.. CPA, MSTTax Partner, Gunnip & Company CPAs)
Financial security in retirement can be thought of as a stool with three very important legs of income. Social Security is one of those three legs, along with retirement plans, such as 401k plans and pensions, and personal savings. When you elect to take Social Security can have profound consequences on your income – and the income of your spouse – for the rest of your life.
1. In just a few months, some of the rules for taking benefits will change.
2. The basic fact is that the longer you can wait before taking your benefit (between ages 62 and 70), the greater the benefit – and many people are simply electing to take it sooner than they need and losing out. You can check your Social Security statement online at www.ssa.gov, and make sure that it’s right. Your social security benefit is based on your highest 35 years of earnings, and if there is reported income that is missing or wrong, it can lower your benefit.
3. Many retirees take their benefit as soon as they’re eligible, for simple fear that Social Security might run out of money. Experts say that’s not a realistic concern in the short term, and even worst-case scenarios forecast a 23 percent cut in benefits by 2035, not complete insolvency.
4. When you take your benefit, you’re making a decision for yourself – and for your spouse. The surviving spouse is entitled to half your benefit. Strategizing as a couple, with your relative ages and incomes, is an important exercise.
5. The “file-and-suspend” strategy to maximize Social Security benefits for couples is going to end April 30. Under this strategy, the older spouse files for Social Security as soon as they’re eligible and suspends payments, allowing deferred benefits to grow – but their spouse can still claim a spousal benefit. That option goes away this year. If you’re of normal retirement age now and want to “file and suspend,” you should look into this strategy quickly.