Newsletter

Investing Insights: How to Maximize Your Social Security Benefits

This is a sponsored column by 3Summit Investment Management, LLC based in Vienna, VA. 3Summit designs custom, modern investment portfolios and has unique expertise in managing investment risk.

By Dan Irvine | Principal, 3Summit Investment Management

Deciding what age to begin claiming your Social Security benefits is one of the most important retirement decisions you will need to make. Your decision can change the amount you receive in your monthly benefits check by as much as 76%!

You reach full retirement age for your Social Security benefits when you turn 66 and 6 months. However, you are eligible to begin claiming your Social Security benefits beginning at the age of 62 in exchange for lower monthly benefit checks for the rest of your life. You may also choose to defer claiming your benefits beyond full retirement age until the age of 70 and receive higher monthly benefit checks for the rest of your life.

Every year after the age of 62 that you defer claiming your benefits; the monthly benefit check you will receive until death increases by an average of 7.4%. The important takeaway is that if you defer claiming benefits from the time you are eligible at 62 to the date you turn 70 years old, your monthly check will be 76% higher each month for the rest of your life.

Of course, like most things in life, to get larger benefit checks you must forgo the smaller benefit checks you would have otherwise received if you claimed earlier. To really understand the decision of when to claim benefits, we need to calculate the age at which you would break-even in total benefits collected if you chose to defer receiving your Social Security benefits until you are 70 versus claiming at 62 when you become eligible.

The table below presents these calculations and the analysis assumes you would be turning 62 in 2020 and eligible to begin claiming your Social Security. Of course, your total monthly benefit will vary depending on your income history, however the math would still work the same regardless of the monthly benefit you are entitled to receive.

Social Security Deferral Break-Even Analysis (Assumes a $1,000 benefit at full retirement age of 66 and 6 months)

The last column of the chart shows the age at which you would break-even in total benefits received as a result of forgoing monthly benefit checks by deferring your claim for an additional year. To receive the maximum benefit by waiting until age 70 to claim, you would have to live to 80 years old to break-even in total benefits collected to make up for the eight years you did not receive smaller benefit checks.

The average life expectancy is just under 80 years old in the United States, but you should take your health, family history, marital status and the importance of your Social Security benefits to fund your retirement into account before making your final claim decision. There is a 50/50 chance at least one spouse will live to 90, so do not make the mistake of underestimating your potential lifespan.

If you live to 90 and claimed Social Security benefits at 70 you would receive 26% more in total benefits than if you had claimed at 62.

Total Benefits Collected at Age 90 (Assumes a $1,000 benefit at full retirement age of 66 and 6 months)

You should always plan to live longer than you expect because running out of money at the end of life is not a desirable outcome. Think of deferring Social Security to age 70 as longevity insurance that you can “buy” from the federal government by paying for retirement out of your retirement savings until you begin receiving Social Security at age 70.

The check you receive will be much larger when you begin collecting Social Security and it is inflation adjusted! If you plan to work past the full retirement age of 66 and 6 months, the decision to defer is obviously much easier and would be the best option.

Costs can skyrocket towards the end of life, deferring Social Security is a high-quality insurance policy that may help cover higher than expected costs and ensure you continue to live comfortably regardless of how long you live. If you have the financial ability to defer Social Security until the age of 70, the Social Security deferral option is the best longevity insurance you can buy and you should have little concern about not living past the break-even age of 80 years old.

Not maximizing your benefits in the event you should pass away before 80 years old is a small price to pay for the extra financial stability  you will enjoy should you have the good fortune to live much longer than you expect.

Learn More

If you would like professional assistance in evaluating your investment strategy and portfolio or would like help planning for retirement, please call (571) 565-2161 or email us, we are always happy to help. Also, consider learning more about this topic and gaining unique investing insights by listening to our popular podcast or viewing our investing video series.

3Summit Investment Management is a fiduciary investment advisor providing clients with an alternative to outdated, conventional investment portfolios. We design custom, modern portfolios capable of delivering greater wealth accumulation with much lower levels of risk. To learn more about how we can help you improve your long-term investing results call (571) 565-2161, email ([email protected]) or visit 3Summit.com.

Recent Stories

Students at West Potomac High School walked out in September to protest Virginia’s proposed policies on the treatment of transgender students (photo courtesy of Mara Surovell) The Virginia Department of…

A woman holds up a piece of handmade decor at the 2021 McLean Holiday Art and Crafts Festival (courtesy MCC) The McLean Holiday Art and Crafts Festival will hit the…

Laura Schwartz is a licensed Realtor in VA, D.C. and MD with McEnearney Associates in Vienna. You can follow Laura on Instagram at @LauraSchwartzRealtor or her Facebook page. Laura can be reached at 703-283-6120 or [email protected] Since…

The office building at 11091 Sunset Hills Road in Reston (via Google Maps) A solar and roofing company is moving its location in McLean to Reston — a $350,000 relocation…

Chris Green is one of the DMV’s finest fitness instructors. A Lululemon and South Block ambassador, he is a coach and mentor to so many. He embodies grace, positivity and motivation in ways that no one else can. If we could all learn a thing or two from him, the world would be a much better place. He does so much for others, and does so with a smile on his face 99% of the time.

He recently ruptured his Achilles and has an incredibly long and tough journey ahead. As if COVID hadn’t impacted fitness professionals enough, throw this in the mix and it’s a double, even triple whammy. CG is no longer able to work and do what he loves for the time being because of this and we’d love your support.

Read More

Submit your own Community Post here for just $99.

The Rhea Baker State Farm Agency is proud to support Shelter House in providing safe places to be during quarantine. Shelter House’s mission is to prevent and end homelessness and domestic violence. Right now they are providing over 200 hotel rooms to those in need in our community. In the past year, across all programs, Shelter House served nearly 500 households comprised of over 1,500 individuals, 60% of which were children.

Of the households that exited shelter, over 70% moved to permanent housing. The Baker Agency has served Vienna and Tysons residents and business owners since 2007 and proudly offers insurance solutions for you home, condo, auto insurance, life insurance and more. We offer complimentary reviews and coach teen drivers to safer, better drivers, and to help keep your auto insurance rates down! We are always happy to talk or text at 703-847-6880.

Submit your own Community Post here for just $99.

×

Subscribe to our mailing list