You should carefully plan for the day when you will begin taking Social Security.
Are you nearing retirement age?
Have you begun thinking about your retirement finances?
If no, you should start now.
According to a recent Forbes article titled “Social Security Benefits: Getting Paid To Wait,” you need to consider from where you will withdraw your income and when you will begin taking Social Security.
If you need to withdraw from your retirement accounts to postpone this, you may actually lose money.
Any money you take from your retirement accounts will no longer be available to invest for future appreciation.
This means your retirement account will not grow for a few years.
This could end up costing you more than what you would gain in Social Security.
How do know what to choose?
You should weigh the opportunity cost against your Social Security benefits.
The math is not always easy to calculate, but there is a simple, indirect rule of thumb that Social Security provides.
What is it?
Can you say “delayed retirement credits.”
It all begins with your birth year (something very difficult to change), but Social Security will give you a bonus for waiting to claim benefits.
Take a look at how that works:
Consider the credits you will enjoy if you choose to delay.
Year of birth Credit per year
1943 and later 8.0%
What does this mean?
Those born after 1943 can get an 8 percent increase in potential benefits each year after age 66 until age 70.
If this will be better for you than the returns you would make in your retirement account, then you should delay Social Security.
Working up until age 70 could also give you a greater nest egg without having to dip into your retirement accounts before you receive social security.
Not everyone has this option.
If you do need to withdraw from an account, remember Roth IRAs are not taxable but traditional plans are.
Use this in your calculations.
Do not delay.
Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.
For more information about estate planning in Overland Park, KS (and throughout the rest of Kansas and Missouri), visit our estate planning website and be sure to subscribe to our complimentary estate planning e-newsletter while you are there.
Reference: Forbes (June 1, 2018) “Social Security Benefits: Getting Paid To Wait”