Did you know that your life expectancy may be increasing beyond the break-even age for Social Security income?

What are we talking about? Let’s dig in.

Social Security income timing is an important pillar to the retirement planning discussion. This topic becomes even more top of mind the closer one gets to thinking about and figuring out where their retirement income will come from.

We find that clients often feel it doesn’t make sense to wait to re- ceive and start claiming Social Security benefits all the way to age 70. Typical reasoning was that they would never live long enough to enjoy the increased benefit by claiming it later. This thinking is fu- eled by either of two common reasons. One, that they have a poor medical history or poor family medical history and fear an early death in retirement. The second reason is fear of the government changing the benefits or running out of money before they had a chance to claim benefits.

Sometimes we suggest clients wait to age 70, which results in the maximum monthly benefit that you can receive. Client’s who are hesitant often ask, “what am I going to do for money in the meantime?

Bridging the income gap between when you want to leave your job and fill in the missing income with guaranteed or promised income such as Social Security Income is the missing piece. By doing the calculations on what you have accumulated, especially in your qualified plans, and figuring out what is net spendable after taxes and deductions becomes the exercise.

On average, waiting from age 62 to 70, the monthly Social Security benefits increase by approximately 80%.1

Clients are usually surprised at the fact that sometimes the taxes they pay on distributions are quite low. Therefore, a very important calculation to determine when to take Social Security is required. Knowing the full story is very beneficial. On average, waiting from age 62 to 70, the monthly Social Security benefits increase by approximately 80 percent.1

So the real question is, should you wait?

Social Security’s most recent Life Expectancy table puts a 50% chance of a 65 year old male reaching age 83, and a 65 year old female reaching age 85.2

When we talk about early claiming, such as age 62, or at full retirement age which is 67 for most people, we need to determine if waiting for the increased benefit at age 70 is warranted. The breakeven for most people is between ages 79 and 81. Which is just over the 50/50 mark for the single life expectancy tables.

An age 65 year old couple has a 50% chance of one spouse reaching age 91.3

But what about spousal benefits? This is where the math and figuring out the bigger picture gets tricky. The most recent joint life tables show an age 65 year old couple having a 50% chance of one spouse reaching age 91!3 So in this case, it might make sense for the higher earning spouse to delay the longest, so their survivor benefit will also be the highest.

The long and short of this article is that a main goal should be to bring guaranteed income into the retirement planning conversation. Having a strong grasp on your income in retirement years is vital to your planning and vital in maximizing everything that’s available to you in retirement.

To have a social security breakeven analysis run for you, as part of our second opinion process, please let us know.

headshot of Brian

Brian Ruh Owner, Financial Adviser

1Its been our experience that for the majority of our clients taking SSI benefits at 62 vs waiting until 67 or 70 that their breakeven is between 79 and 81. There can be outliers to this based on different earnings and claiming ages

This material is for general informational purposes only and was produced by Action Financial Strategies, LLC.

SMRU # 1950991