Time in the Market vs. Timing the Market

By: Susan Koe, CFP®

Many of us have been contributing to Social Security since our very first job and look forward to the day that we can start seeing a benefit from that investment. It is not surprising that 23% of Americans file for Social Security as soon as they can at age 62. However, this can be a mistake that can have long-term consequences on your retirement plan.

Reasons to Consider Waiting

1. If you file for benefits before your Full Retirement Age, your monthly benefit may be reduced. This reduction is between 25-30% and is permanent. Also, if you are married, the lower Social Security payment will go away when one spouse passes away. If the spouse with the greater Social Security wage history waits for as long as possible to file, that larger benefit will be left for the surviving spouse.

2. Your benefit may increase around 8% per year between your Full Retirement and age 70. After reaching age 70, there is no additional benefit to waiting to take your benefits.

3. If you are still earning money from a job, it is likely that this income will put you over the limit to avoid taxes on the Social Security Benefits. You could end up paying taxes on up to 85% of your Social Security benefit. If possible, it would be beneficial to wait on taking Social Security until you retire.

4. Americans are living longer—at age 65, men can expect to live another 18.2 years and women another 20.7 years. If you expect to live longer than average, then you will likely get more money from Social Security in your lifetime by waiting to file. For many individuals, the break-even point often falls in the late 70s to early 80s

Social Security decisions are highly personal—and the timing can have a meaningful impact on your long-term retirement income.

Before you make a decision, consider how your benefits fit into your broader financial plan. A thoughtful analysis can help you evaluate your options with greater clarity.

Connect with an EP Wealth advisor to explore your Social Security strategy in the context of your overall financial goals.

 

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