This is the second in a series of posts about planning for Social Security benefits in retirement. It will give you some ideas on how you can get the maximum Social Security benefit possible. It will also cover some mistakes that you need to avoid when filing for Social Security benefits for the first time.
Getting The Best Social Security Advice You Can
Tell me the truth – deep down, you’re sick of working. You really want to quit your job and retire, no matter what the cost. And part of your plan relies on the income that you’ll receive from Social Security. I need to give you fair warning – you might not like what I’m going to say about your plan. But before you disregard the advice that follows, you should know that I authored a best-selling book on Social Security. I’ve been quoted on CNBC, and many of the top financial experts in the nation agree with me. And I think my advice will be an eye-opener for many people who will be applying for Social Security benefits in the next few years.
The Best Age to Take Social Security
“What is the best age to take Social Security?” “Taking Social Security at 62 vs 66 – which is best?” I’ve heard those questions more times than I can count. And while every situation is different, I’ll tell you that, for most people, the best age to apply for Social Security benefits is definitely not “as soon as you’re eligible”. I know, I know – all of your friends are telling you that the Social Security program is going broke and you need to get your money back out of it while you can. Well, are your friends going to be there with handouts for you, if it turns out that you made a huge mistake and end up going broke yourself?
The Social Security Breakeven Point
Figuring out the best age to take Social Security depends on several variables, but yes, there is a breakeven point where, if you live long enough, in hindsight you’ll know whether or not you made the right decision. The short video snippet that is included with this post shows how that breakeven is calculated. In the video, the assumptions that I have used results in a breakeven point that occurs at about age 82.
However, I’m going to pass along a piece of advice that I got from noted economist Larry Kotlikoff that made me change my attitude about the breakeven question. As he pointed out, if you take your Social Security benefits as soon as you’re eligible and then die before your breakeven point, yes, you’ll have more money than if you had delayed applying. But what good does it do you? You’re dead, and dead people don’t have financial problems! What he told me is that the last thing I should worry about is how much money I’ll have if I die early. Instead, he told me, I should be worrying about living a long time and running out of money. So if you understand Larry’s way of thinking, the breakeven point should not be a major factor if you’re trying to figure out the best age to apply for Social Security. Suppose your primary concern is coming out on the right side of the breakeven point. You delay applying for Social Security and then die before receiving any benefits. In hindsight, yes, you would have gotten more money from the Social Security system if you applied earlier. But why on earth would that be your primary concern? If you apply as soon as you are eligible, your benefits are significantly reduced. And what happens if you do live beyond your breakeven point, and have to spend your golden years just getting by on your meager Social Security check? Social Security can provide you with a guaranteed monthly income, and the decisions you make can make a significant difference in your standard of living during retirement. And truthfully, that was the best Social Security advice I have ever heard. Thanks, Larry!
Last but not least, the decisions you make about claiming Social Security will become even more important when you consider the legislation that may spell the Death of the Stretch IRA. I’ll cover more about that in a later post.
Stop back soon for more Social Security talk!
For more information on this topic, please visit our Death of the Stretch IRA resource.
P.S. Did you miss a video blog post? Here are the past video blog posts in this video series.