Buffalo, NY (PRWEB) September 30, 2013
Winthrop Financial understands that most have not heard the words “planning” and “social security” in the same sentence. For those individuals approaching the age of electing to take social security payments, there are strategies that can result in more lifetime income and can extend investments for a longer time. A Sept. 8 Wall Street Journal.com article, “How to Maximize Social Security Benefits,” outlines the options retirees have, but maintains that everyone is different.
Of course, each individual and each family is different and there are multiple scenarios to calculate in order to make the right decision. Winthrop Financial advises that rather than automatically signing up for social security at the full retirement age, it is best to take a step back and assess the options.
Why delay works:
Retirement resources consist of two parts – investment portfolios and social security benefits. For retirees with average or above average life expectancies, the ability to defer Social Security payments, if only for a few years, may provide their best strategy of extending the expected longevity of their financial portfolios.
Social Security can supplement the withdrawals from the retirement account at age 70, thus decreasing what is needed to be taken from the retirement account. As an example, for an individual with a moderate retirement account value of $500,000 to $700,000 and a social security rate around $1,500 to $2,000 per month, delaying Social Security benefits until age 70 may result in having the investment portfolio provide almost 10 years more of payments and still have a remaining balance in investments, while providing greater real spending annually. This sounds counterintuitive but by the time someone reaches age 70, the withdrawal amount may have grown to a substantial size that the social security will supplement, and withdrawals from the retirement account can then be decreased.
The returns on delaying social security are strong – almost eight percent per year “return”, which may be more than a typical retiree’s portfolio return over the same time period. This contributes to the extension in time of how long assets will last if the Social Security amount is left to grow for the additional years to age 70. While each year of delay results in one less year of benefits, if the retiree lives to early 90s and delays social security from 62 to 70, cumulative real benefits can be 20-30 percent higher. This is particularly beneficial for most retirees who approach retirement years with low to moderate financial wealth.
Social Security benefits can be taxed as much as 85 percent where distributions from a retirement account are lower at the marginal tax bracket. Taking social security early or working part time during the beginning years of retirement can cause real spending to increase due to the taxes on Social Security, thus reducing wealth.
Strategies for couples are available. Women tend to live longer and marry men older than themselves. The possibility of the woman being the surviving spouse is significant. Therefore, if the husband has a higher social security payment, rather than just apply at 65 or 66 when at full retirement age, the family needs to look at some planning and the projections before acting in order to maximize lifetime income for the eventuality of the wife living past the husband. The higher-wage earner husband can apply for social security at full retirement age and suspend payments for himself, while the spouse can receive her benefit of half of social security amount of the higher wage spouse, and at age 70 husband can take his increased benefit and the wife will be able to get half of that increased benefit amount. This may result in an additional $150,000 or so in lifetime payments for the couple. Retirement plan assets can supplement the income needs during the first few years of retirement.
A meeting with a financial planner should focus on social security income and its place in retirement planning if in pre-retirement. A planner can help a client in determining the optimal age and filing strategy for Social Security benefits. Planning horizons, the level of wealth, taxes, and lifestyle for each couple or individual is always varied. Discovering an optimal spending plan during retirement can be accomplished through a review with a Winthrop Financial advisor.
For more information, please visit: http://www.winthropfinancialwny.com/.
About the company:
Winthrop Financial combines 93 years of experience as financial guides to bring the knowledge and proven service to help people feel comfortable with not only where they are, and where personal financial guidance can lead them. They focus on helping individuals with their life transitions, from young professionals accumulating assets, to affluent individuals and families, to those close to or in their retirement years. By providing financial planning, asset management, and wealth management services, Winthrop Financial helps clients prepare for their retirement and or even college. For more information, visit their website.