Using several software tools and an array of differing assumptions, we project the impact of claiming Social Security early, filing at a normal retirement age, or delaying a claim in favor of larger benefits at a future time.
It’s complicated because many variables come into play regarding exactly what benefits one may be eligible for. This means we might start the process with questions such as: “What is your life expectancy?” “Have you worked for the federal government – or a state government that does not contribute to Social Security?” “How long do you plan to work?” “What is your retirement income need?” “What about your spouse’s retirement income need?” “What might a survivor need?”
As these last two questions suggest, two types of benefits must be considered – personal benefits and spousal benefits. And, to be clear, a spousal benefit may apply to a married, divorced or widowed spouse.
A good place to start considerations is with the estimates of benefits provided by Social Security. These used to be mailed statements but are now offered online. Any one -- of any age -- can set up a “My Social Security” account to access your earnings records on file and request an estimate of benefits.
We can help clients receive the benefits estimate, we can help them understand what assumptions have been made in determining the amount, and we can work with them to put these factors into a retirement plan.
We can also help clients understand all of the Social Security benefits that may be available to them. For example, it’s not uncommon to find people who do not realize they are eligible for benefits in a widowed or divorced situation. In fact, a woman who is divorced is considered as a widow as far as Social Security is concerned.
Another situation that is often confusing is when the first spouse dies and the widow or widower is now living on one Social Security check instead of two. It is definitely complicated, but it can make a difference of hundreds of thousands of dollars.
In summary, Social Security benefits – what they include and when to access them – is a subject that is complex but critically important for proper financial planning.