You may have heard that choosing the right social security claiming strategy can help you and your spouse maximize your benefits. But which strategy is best? What's the appropriate age to claim? What about spousal benefits? If you're wondering which path to take, these social security basics may help you get started.
Choosing the right age to claim
Retirees can apply for social security anytime between ages 62 and 70. Claiming as early as age 62, however, can permanently reduce not only your benefits but your spouse's survivor benefits. On the flip side, delaying until age 70 rewards the worker with the maximum benefit and locks in the highest possible benefit for a widow or widower. Of course, retirees who wait until age 70 to claim benefits may need to bridge the income gap by drawing down their retirement portfolio. So, what is the "magic age" to claim?
Until you or your spouse reaches your full retirement age (FRA), you won't be able to take full advantage of social security claiming strategies. For many of today's retirees (those born between 1943 and 1955), FRA is 66. If you fall into this category and claim your benefits prior to age 66, you will automatically apply for both your worker benefit and any additional benefits you qualify for as a spouse, assuming your spouse is already receiving benefits. If you wait until your FRA to claim, however, you can elect to take one benefit or the other, switching them at a later date if advantageous. In addition, once you reach your FRA, social security benefits are no longer offset by earned income from work.
It's worth noting that the magic age doesn't have the same effect on spousal survivor benefits. A surviving spouse can claim either his or her own benefit or the survivor benefit independently (even prior to FRA), then switch to the other benefit after FRA. In other words, by claiming prior to FRA, the spouse isn't deemed to have claimed both the survivor benefit and his or her own worker benefit.
It's a common assumption that, if both spouses delay claiming social security until age 70, they can maximize their monthly benefits. That's not always the case, however. To help ensure that you don't leave money on the table, here are a few strategies to consider. (Note that, for a couple to take advantage of these strategies, at least one spouse must have reached FRA.)
It's important to note that many social security claiming strategies seek to provide a larger cumulative benefit over a couple's lifetime rather than generating a greater benefit today. If you and your spouse have shortened life expectancies, a delayed claim may shortchange you, possibly lowering your current standard of living or depleting retirement assets that could pass to your heirs.
Clearly, when it comes to determining the optimum social security claiming strategy, numerous variables are at play. Your financial advisor can help you evaluate the benefits of different strategies and find the option best suited to you and your unique situation.
Robert Donaldson is a financial advisor located at Advisory Group West. He offers securities and advisory services as an Investment Adviser Representative of Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. He can be reached at (818)241-9061 or at (Derek@advisorygroupwest.com).
©2013 Commonwealth Financial Network®
As we look at the trajectory of the U.S. economic recovery, once again this year we see a light at the end of the tunnel and wonder if it is an oncoming train. At this point, it looks as if 2012 may bring the start of sustainable growth. But the end result remains vulnerable to outside influences, so the real question is, How will we know?
When it comes to sustainable growth, economists focus on a number of key indicators, including:
Are these improvements sustainable? They could be. The current level of employment growth seems to be sustainable around a trend line that would promote continued recovery; continued growth in spending would follow as a result. The housing recovery and growth in durable goods demand should also be able to continue their forward trajectory. Factor in a gradual recovery in local and state government spending and slow growth in business investment—both of which are occurring—and the recovery appears to be on track.
So what could derail it?
Major obstacles to the ongoing economic recovery would likely be external events:
Of the three, the most probable seems to be the last (although ongoing debt concerns in Europe have certainly added to market volatility). Notably, however, all three examples are political, not economic, events. That political events now trump economic ones is a reflection of the new world order. In some sense, though, this is just a reversion to the origins of the economics discipline, when it was known as political economy. Events in the real world are once again dominating those in the financial world.
Which brings us to the major issue of the day.
It's no secret that the U.S. has budget problems, which came to light in a very public way last summer with the debate in Congress over whether or not to raise the debt ceiling. Now, we have to face the reality that this year's presidential election will determine the government that will have to make long-term decisions about how to deal with the country's budget woes.
To understand the basis of the decisions they will make, we must first understand the underlying facts:
Despite how uncertain our economic picture may be, especially when you consider the political obstacles that could derail the recovery, there are positive developments at work. As financial advisors, we work with investors to help keep their financial plans on track, regardless of what the future brings. And we'll be keeping an eye on that light in the tunnel and hoping for the best.
©2012 Commonwealth Financial Network®