Maximizing Your Social Security Benefits

Thomas Evans, CFP®, MS-PFP

Senior Advisor

JNBA Financial Advisors

thomas.evans@jnba.com

www.jnba.com

Topic: Wealth Management

Social Security is a hot topic affecting the retirement plans of many that will continue to garner a lot more attention in the coming years.  As our country's largest group of workers,  "The Baby Boomers", is set to retire between 2012 and 2030, more and more people will begin to pay attention to the complexities surrounding this retirement income source, and rightfully so.  With the quantity of Boomers, the recession, and high unemployment rates, the ratio of workers to beneficiaries is expected to be 2.1:1 by 2030, which means that workers will have to pay more money to cover the extra beneficiaries.  This has many concerned about the future of Social Security funds and wondering how they can best utilize the benefit which is one of the most challenging financial decisions many people face.

When do I claim my Social Security benefit? Do I take a reduced benefit at age 62 or wait to full retirement age? Should I claim a spousal benefit? How does my current income affect my Social Security? How will my payment be taxed?

When Social Security was first enacted, a worker could claim benefits at age 65, and the average life expectancy was 67.  In 2010, the United States Census Bureau calculates the average life expectancy in the United States to be 78 years old. This is great news. Life expectancy is increasing! Unfortunately, since no one wants to outlive their assets, longevity has also created the financial challenge of coordinating Social Security benefits to best fit your financial plan and goals. 

A key initiative for the JNBA Financial Planning Committee is the review and analysis of the Social Security options impacting individuals and families who are approaching retirement. Our challenge is to help them evaluate how their choice of Social Security payments can best meet their needs in retirement. The solution to this challenge is not one-size-fits-all. The solutions are numerous and complex.

 One example solution is the spousal benefit. A spousal benefit provides the ability for a spouse to claim a Social Security payment from the higher earner's benefit. Here is how it works; a spouse is entitled to a 50% payout of the higher earner's check if that amount is higher than the benefits of their own work record. It is in the best interest of the spouse to claim the higher benefit. A second strategy is the "claim and suspend".  A "claim and suspend" strategy is utilized when a lower earner is looking to receive a benefit on a higher earners work history. The higher earner, who has reached full retirement age, claims their benefit and then requests a suspension. The lower earner claims a spousal benefit, and the higher earner continues to work and accumulate delayed retirement credits until age 70. The current benefit increase for a delayed retirement credit can be as high as 8% annually. In this strategy the spouse is able to initiate a Social Security claim at a higher payout even though the spouse continues to work.

These are just two strategies an advisor may consider in helping to maximize your Social Security benefit. At JNBA, our goal is to be an advocate and provide a Social Security solution customized to our clients' needs. As you approach retirement, I encourage you to contact your advisor to assist you in this challenge, or contact JNBA Financial Advisors to see if we are a good fit for you.