Broker Check

The Social Security Decision

July 29, 2018

I can not think of a single financial planning area riddled with more confusion and fear than the Social Security Claiming Strategy.

John, should I take Social Security now at 62, or wait until 66 1/2, or 70? Financial planners often cannot even agree when reviewing the same case study! I read articles weekly from Mary Beth Franklin, an advisor, and an excellent and well respected authority on the subject. Franklin illustrates how dynamic this subject is and how personalized it needs to be for each person or couple. Anyone that outright tells you "You should do _________," is doing you a disservice if they have not asked you some questions first. Variables such as longevity, heirs, budget concerns, immediate needs, all apply.

It sounds crazy, but there is one question that makes it a very easy decision. "Tell me when you are going to die and I'll tell you exactly when to start benefits!" But as quirky as that sounds, and it is accurate, most of us just don't know when we are dying with certainty, and we are often dealing with JOINT life expectancy for many plans. So yes you need to answer some questions, and yes in the end it's a partial guess or trade off that I can illustrate outcomes and break evens easily with software I have. But I am going to arm you with a few facts that I think apply to all of us.

1. The further out you are, the less useful the calculation in your overall plan. Not just for the SS decision, but many aspects of your overall plan and strategy.  Here's the best example I can think of:  When I program my GPS for Tucson to go see my son Taylor, and I'm 435 miles away, the arrival time is displayed...but I have almost no chance of hitting that number exactly, with hours of traffic changes, weather events, food and gas and bathroom stops. When I'm 30 miles out and I have plenty of gas, no stopping needs, I can start to trust the GPS arrival time a lot more. It doesn't mean I won't use the GPS at the start of the trip, but I have to accept the reality of the changes ahead. Heraclitus, a Greek philosopher said, "The only constant is change." I thought it was Einstein but looked it up for this Blog post.

2. You do NOT need to decide to delay from 62 to 67 or 65 to 70. You can go one year at a time. Many clients have the means to delay from 62 to 63 because of a severance, or inheritance, or their portfolio cash. That one year delay gives them a 7-8% increase on their starting amount. Now we have a year to decide if we want to delay from 63 to 64 for another boost in starting amount of 7-8%. Repeating the process yearly and going to the Dr. yearly and gauging health and portfolio health, etc. If we were blessed enough to delay 4 years, we have about a 30% larger SS to start.

I do believe if we can find a way to delay, and you have good genes and take care of yourself, you will thank me when you are 80. If we have to start now, I can usually put your mind at ease that you are making a sound choice.

Have a great week. As always, my posts are public and free to be forwarded and shared openly. If you received this and aren't on my distribution list, simply let me know and my team will add you for future content. Thank you for your time.