Social Security will likely be one of your greatest income sources in retirement and it’s a big factor when we work to help people retire and become financially independent.

Alex discusses when is the optimal time to take Social Security from a mathematical standpoint AND provides you with a few hidden scenarios many people fail to consider when trying to maximize their benefit.

Simple Way To Maximize Your Social Security Benefit + 4 Pitfalls You Must Avoid

Resources:

• Click here to watch our video on 9 Best Questions to Ask a Financial Advisor in 2023
• Download our FREE guide: 5 Retirement Mistakes to Avoid

Full transcript:

SPEAKERS

Alex Okugawa 0:00
Social Security will likely be one of your greatest income sources in retirement. And it’s a big factor when we work to help people retire and become financially independent.

In today’s video, I’m going to show you when is the optimal time to take Social Security from a mathematical standpoint. And I’m going to provide you with a few hidden scenarios many people fail to consider when trying to maximize their benefits. plus a bonus tip to make sure you aren’t caught off guard once you receive your first social security check.

Now, there are typically two camps of people. The first is to take benefits as soon as possible. The second is to wait as long as possible. Both could be right and let’s see why.

So let’s assume someone’s Social Security benefits would be about $2,300 at age 62, about $3,300 at age 67, and about $4,200 at age 70. As evident on the chart, the longer you live, the better waiting until age 70 To collect benefit works.

And that’s because the longer you wait to take benefits, the higher your monthly benefit is. Conversely, the earlier you take benefits, the lower your monthly benefit will be. So the optimal time to take benefits can come down to how long you live. If you don’t live a very long time, taking benefits early would be the best. But if you live a long, healthy life, waiting to take benefits would be better.

Now ultimately, nobody knows the expiration date on their birth certificate. However, looking at your current health and family history can give you some insights.

Now, unfortunately, the optimal time to take benefits isn’t that simple, because it fails to account for what I call real-life factors.

So let’s look at the first scenario. And that’s where there may be spouses where one has a large benefit, and the other has a small benefit in these situations. Usually, the optimal benefit is to occasionally have the spouse with the smaller benefits start early and then have the spouse with the larger benefit delay as long as possible. This is primarily because if the spouse with the larger benefit passes away early in retirement, then the surviving spouse, as long as qualified, would receive an amount equal to the surviving spouses higher benefit. And this can be critical to protect the spouse with the lower benefit.

A second scenario that requires a deeper dive is when a spouse is still working. If you take Social Security benefits before your full retirement age, and you’re still earning an income, you could have your benefits reduced by Social Security.

So for example, if your full retirement age is 67, and you’re 64 this year, if you earn more than $21,240. So security will deduct $1 for every $2 you’re above that limit. Now, you’ll later recoup these benefits that security withheld, but it can take a decade or more to fully recoup.

By the way, if you’re enjoying this video so far, please drop a like and if you’re not already subscribed, hit that subscribe button. We post videos like this every week if you find this one valuable.

A third scenario is when you don’t need to start security before age 70 Because you have other income sources to meet your needs. And that’s a good place to be starting so security unnecessarily can increase your taxable income and most people are surprised to learn that up to 85% of your Social Security benefits can be federally taxable.

For example, if you file a joint tax return and your combined income is more than $44,000, then 85% of your benefits may be taxable. And for most people in retirement, they will cross that $44,000 threshold very quickly.

Lastly, the bonus tip I have for you today is to make sure you aren’t caught off guard when you receive your Social Security check. Make sure you know if you’ll be subject to the Windfall Elimination Provision or the Government Pension Offset.

The Windfall Elimination Provision may reduce your benefits if you work for an employer who doesn’t withhold Social Security taxes from your income. Now people may miss this because Social Security doesn’t take this into consideration when providing your Social Security statements.

Even more painful is the Government Pension Offset which impacts widows. If you receive a retirement or disability pension from an entity that you didn’t pay, Social Security taxes on, your widow’s benefit may be reduced. And honestly, that’s the last thing you want is to be surprised while you’re in the middle of grieving.

Now this is the kind of stuff that we help folks with to make sure they’re not only taken care of now, but that the surviving spouse will be taken care of as well in the future.

And if you’d like the comfort of that knowledge knowing your spouse will be taken care of I’d love to talk with you over a quick 15-minute chat. It’s complimentary and I want to make sure that you and your family are taken care of.

Now you can check if you’ve been paying into Social Security by looking at the back page of your statement, turning it over and reviewing your earnings record and I’ve provided a document with more information on both the Windfall Elimination Provision and Government Pension Offset in the description down below.

Now ultimately, you may have a combination of one of the above scenarios which further complicates the picture. Sometimes people are looking for help from a qualified financial professional, but I understand finding the right adviser is hard. So we posted a video nine best questions to ask a financial advisor and you can watch that below.

Once again, this is Alex Okugawa from One Degree Advisors. Thanks for watching, and I hope you found this video helpful. I’ll see in the next one.

Transcribed by https://otter.ai

The One Degree Blog

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This does not constitute an investment recommendation. Investing involves risk. Past performance is no guarantee of future results. Consult your financial advisor for what is appropriate for you. Disclosures: https://onedegreeadvisors.com/solutions/#disclosures