When it comes to retirement planning, one important decision is when to start claiming Social Security benefits. The good news is that you have a lot of flexibility in choosing when to begin receiving payments.
Let’s start by saying you should not rely on Social Security for your retirement income. As a general rule, you can expect Social Security to replace about 40% of your pre-retirement earnings if you take home an average income. But most seniors need more money than that to live comfortably. To achieve financial security in retirement, you should aim for a diverse investment portfolio, including your 401(k), stocks, bonds, real estate and more.
When it comes to withdrawing funds from your Social Security account, you can opt to start as early as age 62, or wait until you turn 70 for a higher monthly payout. It’s important to note that there’s no financial benefit to delaying beyond age 70. Once you reach your full retirement age, which is 67 for those born in 1960 or later, you’re entitled to your complete monthly benefit based on your earnings history.
While reducing your monthly Social Security benefits poses some financial risk, there are a few reasons to consider claiming benefits prematurely despite this reduction. Here’s what you need to know.
If your career doesn’t align with your passions, claiming Social Security benefits early might be a good choice for you. Claiming your benefits early can give you the financial freedom to pursue a different career. By receiving benefits at an earlier age, you could have the flexibility to take on new opportunities. You can try out different professions while you still have the energy and drive to be successful at them.
Furthermore, claiming Social Security early can also allow you to enjoy your golden years to the fullest. Instead of waiting until later in life to retire, you can retire early and have more time to enjoy yourself. You can travel more, spend time with loved ones, or pick up a new hobby.
It’s important to carefully consider the financial implications of claiming benefits early. Always weigh the benefits against any potential downsides.
Claiming Social Security benefits early can provide you with seed money to pursue your entrepreneurial dreams and start a business. With the financial cushion provided by early benefits, you may have the freedom to invest in your business without worrying about financial constraints.
Additionally, claiming benefits early can give you the option to focus solely on your business venture. This can be especially important if your business requires a lot of time and dedication. Not only can starting a business be a fulfilling endeavor later in life, but it can also be a lucrative one.
By pursuing your entrepreneurial ambitions, you may be able to increase your income and make up for the reduction in Social Security benefits over time.
Before starting a business, consider the total financial risks and rewards. Having an experienced financial advisor to walk you through this potential venture can help you consider all the factors involved.
Balancing a full-time job with taking care of your health can be challenging. Did you know only 22.6% of retirees aged 65 and over are in fair or poor health? While it’s possible to maintain a healthy lifestyle while working full-time, the stress and long hours can affect your overall health.
If you’re considering retiring and claiming Social Security benefits early, it could allow you to transition to part-time work at a younger age, giving you more time to focus on your health. This could potentially reduce the risk of developing medical conditions later in life and the associated medical bills.
While claiming Social Security benefits before full retirement age will result in a reduction in benefits for life, it may still be the right move for you based on your unique circumstances. Be sure to consider all factors involved before making a decision.
Always evaluate the financial implications of claiming benefits early carefully. Your financial advisor is a great resource to help you weigh the benefits against any potential downsides.
The recent 2022 Social Security Trustees report finds that in 2034, retirees will start receiving a reduced benefit if Congress doesn’t fix funding issues for the social program. In other words, Social Security will exist after 2034, but retirees will only receive 77% of their full benefit starting then.
While lawmakers are expected to take action to address Social Security solvency, their decision could significantly impact your retirement plans. Those close to retirement can remain fairly confident that the law will not change much for them. However, it is more likely that benefit policies will change for younger people.
Additionally, according to research conducted by The Senior Citizens League over the past decade, benefits lose buying power over time. That’s in large part due to the fact that the annual cost-of-living adjustment doesn’t accurately reflect the rising prices faced by most older and disabled Americans. Mary Johnson, Social Security and Medicare policy analyst for The Senior Citizens League stated “This means that in the years when medical costs rise more rapidly, the CPI-W, which is used to calculate the COLA, doesn’t reflect the full scope of those price increases. The result is COLAs that don’t keep pace with health care costs and a loss of buying power over time.”
With these reasons and more, it is important to have a plan in place to supplement your Social Security income in order to live a comfortable – and enjoyable – retirement.
Deciding when to start receiving Social Security benefits is an important part of retirement planning. If you’re considering claiming your Social Security early, make sure you have a financial advisor to help you along the way.
The best option when it comes to supplementing Social Security income is to have your own retirement nest egg. A solid retirement income plan should include guaranteed income, growth potential, and flexibility.
Working with CKS Summit Group can be a valuable resource when it comes to making informed decisions about Social Security benefits and creating a robust retirement income plan.
Our team of financial advisors believe the right mixture of carefully chosen non-stock market and managed market accounts can create a blended portfolio which is capable of producing increasing income, stable growth, preservation of principal, safety and flexibility all at the same time.
Are you working toward your retirement? Are you counting solely on Social Security? Don’t discount the possibility of retirement income planning to help fund a comfortable and financially stress-free retirement.
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