On today's episode of the Wiser Roundtable Podcast, the team talks about ways to maximize social security and why it is important to do so.
A lot of people are hearing for the first time to delay in collecting their social security payments. There’s a lot of information out there, but a lot of it is misinformation, so it is important to do your due-diligence. To be clear: if you take social security at 62, you are taking it at a penalty. If you wait until 70, you are gaining an 8% increase in benefits. The goal is to wait for a higher payout.
The media has been saying this for years. The reason why it’ll last is because of the Old Age and Survivors Insurance (OASI) Trust Fund. This was created to fund the gap when there are less people paying in than taking. 76% of the money needed to support social security today is still coming in from people working. That leaves only 24% of funds that the trust needs to cover. The government can cover this by writing a check, increasing taxes, or increasing the amount that social security stops drawing from your paycheck.
When you do the math on this, the findings show that it does not actually work to help you long-term. Based on the math, it would be extremely hard to invest that money from the retiree's age 62 to 67 to create a realistic diversified portfolio which is able to produce the income that is guaranteed otherwise from simply delaying social security.
Say you are 62 and SS is the only income you can draw on. We advise you to spend on other investments you have in order to delay drawing on Social Security for as long as possible. Take it early if you absolutely must, but know that you are handicapping yourself.
This is hard to overcome because it is an emotional thought process. There are some exceptions here: We assume that our clients will live until age 95 unless they say otherwise. If there is a likelihood that they might not make it to age 80-85, we recommend that they start drawing at 62. Outside of that, you will most likely live longer than you think.
Let's look at a husband and wife scenario. The husband’s SS benefit is $2,500/mo and the wife’s is only $800/mo because she did not work or worked very little. She is eligible for half of his SS or all of her own. When he dies, she can take all of her SS or all of his. In that case, if he delays she will be able to collect more when she is a widow.
1:05 When to Take Social Security
2:20 What if social security goes bankrupt?
9:36 Investing Social Security Payments
13:55 You Need Cash Flow
15:44 Antsy for Your Social Security Check
20:22 Receiving Social Security Benefits from a Spouse or Ex-Spouse
Learn more about Brad Lyons.
Learn more about Matthews Barnett.
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