HF Advisory Group 2021 Social Security Guide
In an era of vanishing pensions and volatile markets, Social Security offers government-guaranteed income that isn’t vulnerable to market risk, can’t be outlived, and can provide for your loved ones after your death.
Our goal here today is to help investors learn more about Social Security benefits and how to maximize their lifetime income from Social Security.
Your Age Affects the Benefit You Will Receive
The earliest age that you can file for Social Security is 62 (Unless you qualify for disability). However, the benefit received will be reduced.
You will be eligible to collect 100 percent of your benefit at your full retirement age, which is age 66 for anyone born between 1943 and 1954, 66 plus a two-month delay per birth year for those born between 1955 and 1960, and age 67 for anyone born after 1960. For example, if you were born in 1956, your FRA would be 66 years and four months.2
Many Americans are forced to file for benefits early for financial reasons, which can cost them dearly in lost income. If you can afford to wait until your FRA, you’ll be eligible for 100 percent of your Social Security benefit.3
It May Make Financial Sense for at Least One Member of a Couple to Delay Claiming Benefits Until Age 70
Many retirees wrestle with the question, “When is the right time to file for benefits?” There is no perfect time to file for benefits but choosing the right claiming strategy can radically affect how much you can collect over your lifetime. Waiting and delaying Social Security past your FRA can increase your benefit by a guaranteed 8% each year you wait.
It’s a good idea to discuss your situation with a financial professional who can analyze your situation and offer personalized advice.
You Can Work and Collect Social Security, but It Might Affect Your Monthly Benefit
Many Americans are continuing to work well into their retirement years. While the government allows you to work and collect Social Security benefits, your benefits may be reduced if you are below your FRA.
In 2021, if you are over 62 but younger than your FRA, you will lose $1 of your benefit for every $2 you earn over $18,960. Keep in mind that you must pay Social Security and Medicare taxes if you are earning income.5
Social Security Benefits Are Taxable
Unfortunately, retirement doesn’t mean retiring your worries about taxes. If you collect substantial income from sources like wages, investment income, rental income, or any source that you report on your tax return, you will very likely owe taxes on your Social Security benefits. The tax rate you’ll pay depends entirely on your overall income bracket since Social Security gets treated like ordinary income.
However, there are strategies that may help you maximize your income while reducing taxes.
If you are concerned about the effect of taxes on your retirement income, we strongly recommend that you speak to a qualified financial professional.
Married? Don’t Forget about Spousal and Survivor Benefits
Married couples need to think about how their Social Security claiming strategies will affect their spouse’s benefits and income in retirement. This issue is especially important when one spouse is significantly older than the other or earned more during a career.
Surviving spouses can usually choose between collecting a personal benefit or a survivor benefit, depending on which one is higher.7
Conclusions
We hope that you’ve found this educational and informative and that you have come away with some ideas for how to optimize your Social Security benefits.
For many retirees, Social Security benefits are the cornerstone of their income strategies and account for a significant percentage of their income. It’s critical to plan now so that you can make the most of this invaluable resource. Every strategy will not work for every retiree, which is why it’s so important to take the time to analyze your needs and test possible scenarios.
Watch this helpful video that provides insight into Social Security
The moral of the tale is this: you cannot depend on a single financial or retirement strategy to build a comfortable retirement. One of the benefits of working with a financial professional is that we keep track of changing retirement issues. We can help you analyze your financial situation and develop personalized recommendations designed to help you best leverage Social Security considering your overall financial goals.
Raymond Hobson, CFP®
Click here to email us with any questions
Click here to schedule a call to learn more
Learn more about Ray Hobson CFP®
Footnotes, Disclosures, and sources:
Securities offered through HF Advisory Group, A Registered Investment Advisor – Annapolis, MD
Opinions, estimates, forecasts, and statements of financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice.
This material is for information purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.
Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.
Diversification cannot guarantee a profit or protect against loss in a declining market.
Past performance does not guarantee future results.
Consult your financial professional before making any investment decision.
Opinions are not intended as investment advice or to predict future performance.
All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your financial advisor for further information. Please consult a tax professional or attorney for any tax or legal advice.
2“Full Retirement Age.” SSA. https://www.ssa.gov/benefits/retirement/planner/agereduction.html [Accessed 3 November 2021]
“Delayed Retirement: If You Were Born between 1943 And 1954.” SSA. http:// www.ssa.gov/benefits/retirement/planner/delayret.html [Accessed 3 November 2021]
3“Retirement Planner: Delayed Retirement Credits.” SSA. http://www.ssa.gov/benefits/retirement/planner/delayret.html [Accessed 3 November 2021]
5“Retirement Planner: Getting Benefits While Working.” SSA. http://www.ssa.gov/benefits/retirement/planner/whileworking.html [Accessed 6 November 2021]
7“Publication 525 (2020), Taxable and Nontaxable Income.” IRS. http://www.irs.gov/publications/p525 [Accessed 3 November 2021]
