by Dave Kutcher
We get questions on social security benefits all the time. The big question most often asked is whether it makes sense to delay taking benefits in order to get a higher amount at a later date. There is a pretty sizable bump up in benefits if you wait to age 70, yet most people do not wait. We think much of that decision is related to uneasiness with the solvency of the social security system.
Waiting to begin your social security benefits translates to “Delayed Retirement Credits” or what is more familiarly known as DRC’s.
To find your normal retirement age, you may visit ssa.gov where you will find a table for determining your normal retirement age, which is based upon your date of birth.
The social security system uses DRC’s to increase your benefits each month after your full/normal retirement age. Benefits increase at a rate of .66% per month which is the equivalent of 8% per year. Again, you can set up an account at Social Security (ssa.gov) and in your portal you can run the numbers to see what the difference in benefits would be at age 62, normal retirement age, age 70 or anywhere in between 62-70.
As an example, if your normal retirement age is 67 and your benefit is declared at $2,500 per month, you will be able to see in the calculator that waiting to age 70, just three more years, would increase your benefit from $2,500 per month to $3,100 per month. That $600 difference equates to an additional $7,200 per year.
The decision as to what age is appropriate for beginning to take your social security isn’t purely about the monthly benefit amount, however. Your personal situation such as whether you are married or not, what your life expectancy looks like and tax brackets all come into play when making this decision.
If you are married and have been the primary breadwinner, resulting in the higher of the two social security benefits available at retirement, you need to remember that at your death your widow will be eligible to receive 100% of your benefit. For some people this might mean the difference between outliving their money or not and would be a very important consideration for this couple.
If you are undecided and wish to delay, no fear, any cost-of-living adjustments etc. that might occur in the system while you delay your decision will, in fact inure to you when you finally decide to begin your benefit payments.
Delayed Retirement Credits don’t kick in immediately unless you delay until age 70. So, your actual date of birth will determine when DRC applies, and this should be information taken into consideration when doing your budget at retirement.
Most people are not aware that corrections or changes can be made regarding your election. Depending upon whether you are pre-, current, or post normal retirement age will determine your options regarding whether you can withdraw your application to claim benefits or suspend benefit payments.
The long and short of this writing today is to say there are many things to consider when making choices regarding your social security benefits. Don’t delay or ignore asking questions … you don’t want to find out the hard way with any “surprises”.
We are here to help you and welcome the opportunity to discuss your options with you and how those options fit into the other retirement plans you may have.
My name is David A. Kutcher, a retired Marine Corp Captain. My business partner in the lower 48 is Richard C. Scott, CLU, LUTCF. For nearly 40 years we have been helping folks with their personal retirement decisions. We encourage you to make an appointment and get ahead of your concerns as early as is possible. You can catch us on the radio every Saturday morning, “Retirement in the Last Frontier”, 8:30-9:30 on AM 650, Keni Radio. Frontier Retirement, 10928 Eagle River Road; Eagle River, AK 99577, (907) 795-7452.
