Whether you are a few years out from full retirement age or you are just beginning your career, there is no better time to plan for your financial future than now. Determining how Social Security will impact your future finances is an important component of retirement preparation, and Gregory Ricks & Associates encourages individuals to stay informed of their benefit options as they make decisions leading up to retirement.
“We want to make sure we have a discussion about it every year until an individual begins receiving their Social Security benefit because things can change,” said Gregory Ricks, founder, CEO and wealth advisor at Gregory Ricks & Associates. “If someone comes in at sixty, and they are thinking about turning on Social Security at sixty-five, that’s a long time. Health can change. Income needs can change.”
Staying abreast of the changes in both your life and in Social Security policies can help your family make decisions that will affect your retirement goals. Incorporating your decisions on your Social Security benefit into your overarching income plan is a vital part of creating an accurate retirement forecast.
“I love it when a great plan comes together,” said Ricks. “It’s rewarding to see our clients happy, confident, and to help them accomplish their goals. It’s great to see people happy in their retirements.”
The Timing of Claiming Benefit Distributions
Deciding when to turn on a Social Security benefit is a crucial step in understanding how your benefit will impact your wallet in retirement. The lifetime value of an individual’s Social Security benefit partially depends on if they wait until reaching full retirement age or not to access their Social Security benefit.
Per Social Security Administration guidelines, full retirement age (FRA) is determined by an individual’s birth year. For individuals who were born between the years of 1943 and 1954, the FRA is 66, and for every successive birth year up to 1960, an additional two months are added to FRA. Those born in 1960 or after will reach FRA when they turn 67. All who are eligible for Social Security can start receiving their payments beginning at age 62, however, the amount will be reduced permanently.
While it may seem intuitive to always wait until your FRA to access the highest level of benefit, there are circumstances where it may be more optimal for an individual to claim Social Security early. When it comes to married couples, if the higher-earning spouse begins receiving Social Security early and passes away first, the lower-earning spouse may ultimately lose out on the full value of their survivor benefit. If the lower earner claims their benefit early and passes away first, there would be no lost benefit for the higher earning spouse. Therefore, it may be beneficial to weigh the option of the higher earner deferring until FRA, while the lower earner claims their benefit before FRA.
When to Begin Thinking About Social Security
“I would say these conversations need to start five years out or even more,” said Ricks. “There are two things we always look at when having our first meeting with a potential client—their date of birth and what their expected age of retirement is. We are looking to get a snapshot of where they are right now and where they are looking to be.”
When the time comes that you are ready to turn on your Social Security benefit, you can do so by applying at www.ssa.gov/apply, or by calling 1-800-772-1213.You can also schedule an appointment at your local Social Security office. An important tip is to remember to register for benefits about three months in advance of when you wish to begin receiving payments.
Ricks also encourages individuals who are 30 years or older to set up their Social Security account. Though a 30-year-old will not be claiming their benefit for at least another 30 years, setting up the account allows the future applicant to keep track of their contributions and anticipated monthly benefit. They then have the ability to address any errors in a timely fashion.
“On our radio show a few years ago, a lady called in about why her expected monthly Social Security benefit had suddenly reduced that year,” Ricks said. “I suggested that she go back and check that what was credited in her account in the past few years was accurate. She did go back, and she found an error and had it corrected. Her benefit assumption was then adjusted accordingly.”
Additional Factors that Determine the Value of Social Security Benefits
Two major factors that go into determining the value of an individual’s Social Security benefit are their work record and earnings. Social Security is calculated based on 35 years of work history. If an individual has been employed longer, then only their 35 highest-earning years will be taken into account.
A married person may be eligible to receive the spousal or “auxiliary” Social Security benefit if their earnings over the course of their working years were less than that of their spouse. This benefit allows the claimant to receive up to 50% of the higher-earning spouse’s benefit at full retirement age. The lower earner can claim the spousal benefit before FRA, however, doing so permanently reduces the benefit. The long-term value of the spousal benefit is also impacted should the higher earning spouse claim their benefit early.
There are several other factors to be considered when it comes to circumstances involving divorce, death of a spouse or a parent, adoption, disability, and more. Those who are curious about their eligibility for Social Security benefits can explore the resources provided by the Social Security Administration online at www.ssa.gov.
Gregory Ricks & Associates also provides an educational guide on Social Security that can walk you through key details to think about when it comes to Social Security benefits. This guide, which is available free of charge, is just one of the many resources that can aid you in making informed decisions about retirement planning.
“Social Security is a crucial part of income planning,” said Ricks. “You don’t want to do income planning without considering it. As financial professionals, we can’t push you in any direction, but working with a well-informed financial professional is still incredibly handy for your Social Security decisions.
“A financial professional might know strategies that pertain to your specific situation and may ask questions that can help you determine what you are looking for when it comes to your Social Security,” said Ricks.
This article is meant to be general and is not investment or financial advice or a recommendation of any kind. Please consult your financial advisor before making financial decisions. For more detailed information, contact a financial advisor with Gregory Ricks & Associates, Inc. Investment advisory products and services through AE Wealth Management, LLC. (AEWM) Insurance products are offered through the insurance business Gregory Ricks & Associates, Inc. AEWM does not offer insurance products. The insurance products offered by Gregory Ricks & Associates, Inc. are not subject to Investment Adviser requirements. Firm does not offer tax or legal advice. Gregory Ricks & Associates, Inc. is not affiliated with the U.S. government or any governmental agency. 3304528 – 9/25