Answering Tough Questions on Social Security

 With a little humor and a lot of facts, our Tim Wyman answers questions about a topic that can easily confuse. There are so many facets of Social Security that is hard for anyone to stay on top of it all, but everyone wants to make the most of their retirement benefits.

This Q & A session holds answers to some of the questions we hear the most.

Tim you seem to have a particular interest in Social Security retirement benefits?

I am not sure if it’s the graying of America or graying myself (really balding in my case) but the issue is important to many of our clients and prospective clients, so I have spent considerable time learning the ins and outs of social security retirement benefits.

Are there general rules that people can use to determine how to maximize social security benefits? 

I wish there were.  Right now there are over 2500 rules in the Social Security Administration handbook.  The challenge, and opportunity, is to apply the rules to each situation.  For some, beginning to receive benefits as early as possible might be best.  For others, especially couples, having one spouse wait until age 70 in order to receive “Delayed Retirement Credits” might be best. I recently blogged about how couples can come up with the best strategy (click here).

Maybe we are getting ahead of ourselves – will Social Security be there for future generations?

Twenty years ago many clients wanted their plans to be reviewed assuming social security would not be available.  As people get closer to retirement this has changed. While there may well be changes to the social security system in its current form, my research suggests that benefits will remain intact for most.  For younger workers, perhaps under 50, it probably makes sense to assume some sort of reduction in benefits when planning for retirement.

Are social security retirement benefits meaningful? Why not just assume they won’t be there.

Social security benefits for many of our clients may be less important in their financial independence, but they are still significant.  It is not uncommon for social security benefits to have a present value of $800k-$1M for some of our clients – I would deem that very meaningful.

When should people start receiving benefits?

That is a very individualized answer.  For some, most Americans frankly, starting as soon as possible (age 62) is necessary to meet their living expenses.  When working with clients in determining a strategy I will try to balance factors such as their income needs, health status, life expectancy, whether they plan to work past age 62, income taxes, and their marital status.  I like to think of a large funnel – we put in all of the factors specific to our client and attempt to determine the best strategy for them. Unfortunately, general rules just don’t provide the best solution.

Many articles have been written on how to maximize benefits – what’s your take on them?

There have been many fine articles written for consumers, as well as research papers for professionals, trying to determine the “best” claiming strategy.  These articles are wonderful in increasing one’s knowledge on the topic.  However, what is right for one person or couple cannot be gleaned from an article.  Determining the ideal solution takes conversation and scenario planning with your particular factors in mind.  It is what we do for clients and has really seemed to provide some clarity in their retirement planning.

For more answers to your social security questions, contact Tim at the Center for Financial Planning.

Timothy Wyman, CFP®, JD is the Managing Partner and Financial Planner at Center for Financial Planning, Inc. and is a frequent contributor to national media including appearances on Good Morning America Weekend Edition and WDIV Channel 4 News and published articles including Forbes and The Wall Street Journal. A leader in his profession, Tim served on the National Board of Directors for the 28,000 member Financial Planning Association™ (FPA®), trained and mentored hundreds of CFP® practitioners and is a frequent speaker to organizations and businesses on various financial planning topics.

Any opinions are those of Center for Financial Planning, Inc. and not necessarily those of Raymond James. C14-004615