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    Getting the Most Money from Your Social Security Benefits

    Maximize Social Security Benefits

    Your Top 4 Social Security Questions Answered, to make sure you are getting the most from your Social Security Benefits.

    We all want to make sure we are making the most of our Social Security Benefits.

    For many Americans, their Social Security Benefit is their biggest asset and one that will comprise a large portion of the retirement income. Unfortunately, most people spend more effort figuring out their next vacation than figuring out when to take their Social Security benefits.  According to the Social Security Administration, about 21% of married couples and 43% of single seniors rely on Social Security for more than 90% of their retirement income. Unfortunately, Social Security benefits typically replace only about 40% of pre-retirement earnings. With this in mind, it is imperative that retirees maximize their retirement income from Social Security.

    By David Rae Certified Financial Planner™, Accredited Investment Fiduciary™

    Whenever I sit down with a new client to talk about Social Security Benefits (or being introduced at a party as a Fiduciary Certified Financial Planner, as it happens), the questions I hear most often have to do with timing:

    •  “Is later always better when taking Social Security?”
    • “When is the best time to claim Social Security?
    • “How long should I wait before claiming Social Security?”
    • “How do I make sure I get the most from my Social Security Benefits?”

    I’m always happy to answer these because if you’re already thinking about Social Security timing strategies in retirement, you’re already on the right track. Also when helping my clients maximize their Social Security benefits, also helps increase the values of their other retirement accounts like an IRA, ROTH IRA, 401(k) or Cash Balance Pension income stream.

    √ Delayed gratification from Delayed Filing for Social Security Benefits

    Ask most people when they think the best time to take Social Security benefits is and the answer will be a resounding “70”, the legal latest you can take it (that is, there are no added financial advantages or incentives for a further delay).  In many cases they are right. The longer you delay taking Social Security, the higher your monthly benefits will be.  Sadly, many people take Social Security Benefits much closer to 62 than 70.

    But there are other significant advantages to delay as long as possible in addition to that bigger monthly check.  The most significant one is lowering the risk of outliving your other retirement savings. The longer you work, the more you save. Social Security pays benefits for as long as you live, which is more than I can say about many other retirement planning vehicles like 401(K)’s or IRAs.

    Interest rates have been near historic lows for years, and I hope they never go back to the big inflationary rates in the ’70s. Delaying Social Security essentially guarantees an 8% return per year in increased monthly benefit amounts.  This increase is also tax-free and fee-free, which makes it even harder to beat.

    √ Couples have choices to make to Maximize Social Security Benefits

    Actuary tables present a sobering picture. For a married couple retiring at 65, there is a 50% chance one will live to 92, and a 25% chance one will make it to 97.* And much as we want to live long and prosper, the reality is that increased longevity may require costly medical or eldercare that can tear through savings like a house on fire. Are you and your pocketbook ready?

    Congress has passed laws that ‘file-and-suspend is no longer an option for most people.   However, married couples still have other features and benefits from Social Security they can maximize.

    The simplest is the spousal benefit, which gives a spouse 50% of their partners’ benefits, even if one half of the couple has never worked a single day in their lives or contributed a single penny into Social Security. This will be most advantageous for couples with a large income disparity between them or if one spouse was a stay-at-home parent.

    √ Planning for a surviving spouse and Social Security Benefits

    No one wants to think about themselves dying or their beloved passing either. But barring a catastrophic accident, one of you is going to go before the other. (Sorry straight guys, in heterosexual couples you are statistically the one more likely to buy the farm first.) I can’t claim that adequate financial planning will lessen the pain of your loss but I can guarantee that without a plan in place the pain will be significantly worse.

    With Social Security, it is important to make choices based on what will be best for both the couple over their combined lifetimes plus the lifetime of the surviving spouse after that.

    The goal should be to maximize income for the surviving spouse.  When do you think money will be tighter when you just retire? Or when one or both of you is approaching 100?

    When the first spouse passes, the second will get whichever is larger

    • Their own benefit or
    • A survivor benefit equal to the spouse’s benefit.

    By waiting until 70 to start taking Social Security, you start with a higher benefit that will benefit your widow(er) in the long run that will also be tied to incrementally larger cost-of-living increases as time goes on.

    √  When your ex is still in the picture

    Let’s say you had a nasty divorce (are there any other kind?). And when you finally signed the papers you breathed a huge sigh of relief. Aside from your kids’ graduations and weddings, you’d never have to deal with this person again. Well, not so fast.

    If you were married for at least 10 years – and you haven’t remarried – you can potentially collect Social Security spousal or survivor benefits.  But that also means your ex can also do the same for you. The good news is that either way, you don’t have to speak with your ex or deal with them in any way to collect benefits.

    Now I’m very pro-marriage (just ask my husband) and into the ‘happily ever after’ thing in a big way. But if you are a divorcee over 60 who is considering getting married again, you might want to give it a second thought in the event that your ex-spouse’s Social Security benefits will then be off the table. Make sure to consult a Fiduciary Certified Financial Planner™ to weigh all the financial, benefits and tax pros and cons that marriage may bring your way.  The strategic timing of tying the knot might put a little extra money in your wallet. Or, you may find that it will be healthier for your bottom line to just live in sin.

    There’s one other Social Security question I hear constantly which is such a biggie.

    “Is Social Security going broke?”

    The short answer is, well, yes and no.  So stay tuned and we’ll get into it in more depth soon.

    I know all of this stuff may make your head spin, but Social Security decisions are some of the most important ones you’ll ever make financially.  Seek out a trusted fiduciary financial planner to see how and when they fit into your overall financial plan.  When it comes to Social Security, you paid into it and you’ve earned it, so you might as well get the most benefits you can.

    Until next time and as always: Be Fiscally Fabulous, Live for Today but Plan For Tomorrow.

    DAVID RAE, CFP®, AIF® is a Los Angeles-based retirement planner with  DRM Wealth Management. He has been helping friends of the LGBT community reach their financial goals for over a decade. He is a regular contributor to Forbes.com David Rae, the Advocate Magazine, 100+ TV appearances, as well as the author of the Financial Planner Los Angeles Blog. Follow Financial Planner LA on Facebook, or via his website www.davidraefp.com

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    Connect With David Rae, Financial Planner LA

    David Rae, CFP® AIF®

    President / Founder DRM Wealth Management LLC

    1(323) 905-4380

    david.rae@financialplannerla.com

    "Getting the Most Money from Your Social Security Benefits"

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