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7 Principles to Help You Plan for Retirement Like a Pro: Principle #3: Good Things Come to Those Who Wait (to Claim Social Security)

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From the very first time you go off to work, you look forward to payday. Getting that first paycheck was the payoff for the hours you spent doing something other than just having fun. Claiming Social Security may seem like a hard-earned reward for years working, but you might not want to do that as soon as you retire. Social Security is particularly appealing because it provides regular income from somewhere other than our own savings. It’s understandable why people are so eager to claim it as soon as they retire, but waiting to claim Social Security can have a pretty incredible payoff.

According to JP Morgan, someone who claims Social Security at sixty-two – the earliest possible age to claim – can expect to receive $2,014 per month, while claiming at seventy can earn you $4,319 per month. In other words, it pays to wait. Here’s a chart from JP Morgan to give you an idea of how this works:

When to Claim Social Security Dallas Texas Financial AdvisorDespite the clear benefits of delaying, the most popular age to claim is still sixty-two. We’ve found that people generally claim early because no one can help them find a satisfying answer to one or both of the following questions:

Where Will the Money Come from?

Most people give up working when they formally retire, which could mean a less steady flow of income than a regular paycheck. This is one of the reasons we think it’s so important to consult a financial planning guide before you retire.

So how are you supposed to delay claiming until you turn seventy if you no longer have a paycheck coming in? By factoring a delayed claiming age into your plans, your financial planner can show you how to fill in the gap from another source such as your retirement portfolio.

There are several other ways to fill the gap between retirement and claiming Social Security, including the use of bond ladders, an immediate annuity that lasts until you are ready to claim, your 401(k), or simply continuing to work until you’re closer to claiming. A thorough financial plan can help you determine out which of these options are appropriate for you.

Isn’t Social Security Supposed to Disappear Any Day Now?

Everyone has heard someone say they’re claiming Social Security as soon as possible to make sure they get in before it runs out. This is a common concern among people nearing retirement age, and it’s not entirely unfounded. The latest data says that Social Security’s funding will run out in 2034 if the government does nothing to stop it.

But Congress is already discussing several solutions – likely either a reduction of benefits or increase in taxes. But even if Social Security does run out of money, you will still get 3/4 of your benefit. It won’t disappear completely.

The safest bet here is to factor in a decreased Social Security benefit to your retirement income plan. Then, if it happens, you’ll be prepared, and if it doesn’t, you’ll be pleasantly surprised.

When you claim Social Security is an expensive decision, and there are no take-backs. Once you’ve claimed, you can’t give it back and claim again later. So make sure you’re making the decision at the right time.

Want to talk about building an income stream so you can optimize your Social Security claiming strategy?

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