For many retirees, Social Security is a key source of financial support during retirement. Indeed, for all participants, Social Security is essentially like a pension plan that pays you inflation-adjusted monthly benefits from the time you elect to begin taking benefits until the time of your death. You cannot outlive your Social Security retirement benefits!
This is an extremely valuable benefit and thus one you will need to manage well in order to maximize the Social Security payments received during your lifetime and that of your spouse. One of the first steps you can take towards managing your Social Security benefits is to obtain a comprehensive statement of the benefits to which you are or will be entitled.
You may have noticed, however, that you are no longer receiving your annual Social Security statement in the mail. The Social Security Administration (“SSA”) is no longer mailing annual statements to most Social Security recipients (or future recipients).
Now, your Social Security information is available online at www.ssa.gov/myaccount/. To access this information you will first need to establish an account. This is fairly simple to do, provided you have your Social Security number, a valid email address, and a U.S. mailing address. One you have established an account, you can view a wide variety of information, including your earnings record, your estimated benefits, and the amount you have paid into the system over the years. It is important to review all this information for accuracy. If you notice any mistakes in your personal information, you should contact the SSA immediately as a mistake has the potential to cost you in terms of the amount of benefits you will receive during your lifetime. For example, if your earnings record is inaccurate or incomplete, then, the calculation of your benefits may be incorrectly low. You can also update your personal information – including an address change or a direct deposit account change – via the website. The ability to make these changes online is usually significantly quicker than calling or visiting the SSA!
There are, however, several things to keep in mind as you obtain online access to your Social Security account. First, there are certain instances when you may not be able to initiate an online account with the SSA or when you may need to take some additional steps to do so. For example, if you have recently changed your name, been the victim of identity theft, or placed a credit freeze on your credit report, then you will most likely have to visit an SSA office to obtain an online account.
Second, please be aware that there are some fraudulent websites and phishing emails now circulating that seek to lure people into providing their personal information, including their Social Security number. As noted on the SSA’s website, the SSA has not and does not send email to anyone encouraging them to sign up for online account access. If you receive such an email, do not click on any link it contains and do not attempt to sign up for Social Security via this email. These emails are clever and may appear to be coming from a legitimate SSA address or may appear to contain a legitimate link to the SSA website. Do not be fooled! If you want to obtain online access to your account, your safest bet is to always type the SSA’s website address into your browser.
Finally, once you have online access to your Social Security account, you will see a variety of calculators designed to help you determine when you should begin taking your benefits. As you may already know, in order to be eligible to receive your full retirement benefits, you generally must not begin taking your benefits before you reach your full retirement age. For most people, this is somewhere between age 65 and age 67 and depends upon the month and year you were born. However, anyone, regardless of their birthdate, may begin taking their Social Security benefits as early as age 62. While it may seem attractive to begin taking your benefits as early as you can, it is important to realize there is often a cost associated with doing so. Basically, your monthly full-retirement benefit amount will be reduced by approximately 25% if you opt to begin taking benefits at age 62. Conversely, you can also opt to delay taking your retirement benefits until sometime after you reach full retirement age up to the time you reach age 70. You will boost your full retirement payment amount by about 8% for each year you delay benefits up to age 70.
The decision of when to take your Social Security benefits is not for the faint-hearted! Rather, it often involves a thorough analysis of the various Social Security options and strategies available to you and your spouse as well as your personal and tax circumstances and financial needs. Also, it usually makes sense for spouses to strategize together in order to best maximize the amount of money they will receive from Social Security during their lifetimes. For example, is one spouse still working and the other retired? Should you file for Social Security and then suspend your benefits? Does it make sense to file for spousal benefits first? Should you live off retirement assets first and delay Social Security benefits? While there is no perfect strategy that works for everyone and there is no way to control all the variables that have the potential to derail even the best laid plans, proper advance planning at least helps minimize the unknowns and uncertainties and maximize the potential benefits received from Social Security.
The calculators on the Social Security website are helpful to a degree. But, if you are approaching retirement and looking for more advanced planning and modeling that fully evaluates strategies involving both you and your spouse and incorporates your other assets, please consider contacting your portfolio manager here at Burke Lawton Brewer & Burke. We have access to some powerful and robust modeling tools that go beyond that which is offered on the Social Security website. Also, we can help incorporate Social Security planning into your overall financial plan.