Advice iq start social security too soon

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Starting Social Security too soon. Strategies to cope and get higher benefits later.

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Advice iq start social security too soon

  1. 1. Start Social Security Too Soon? Submitted by Larry Frank Sr. on Fri, 09/06/2013 - 12:00pm Social Security officials often encourage starting benefits as soon as you are eligible. But they can’t counsel you on filing strategies. Convenient for them but inconvenient for those who don’t know the ins and outs of filing and may file too early in life. If you or someone you know started benefits early, strategies exist to still enhance monthly benefit checks or even let the recipient take a job without losing benefits. Knowing the filing rules helps maximize retirement income. Even if you started Social Security early, you can suspend your benefits after you reach the Full Retirement Age (FRA) of 65 to 67, depending on your birth year, then restart your benefits anytime up to age 70. Though starting Social Security early cut your benefit, by suspending your benefit after reaching FRA you still get a juicy 8% annual increase on your benefit, called the Delayed Retirement Credit (DRC). For someone born after 1942, for example, a four-year suspension equals a 32% benefit increase and a two-year suspension equals a 16% benefit increase. You’ll have a hard time safely securing an 8% annual guaranteed benefit increase anywhere else today.
  2. 2. For couples, the spouse who did not file and suspend at FRA can file and restrict their filing to spousal benefit only, even though their spouse suspended their benefit as described above. This offsets not getting the full benefit amount because of this suspension by the other spouse. When the couple reaches age 70 – or any earlier age if need be – they restart their full benefits with DRCs applied, resulting in a larger monthly payment. Couples increasing retirement benefits this way also maximize survivor income from Social Security. Singles or couples may combine these filing tactics with a bridge strategy to provide income for these couple of years of lower, or no, Social Security benefits. Delay is worth that price: Higher Social Security benefits by age 70 take pressure off the portfolio to sustain income, potentially for many more years, because benefits payments increase enough to forestall dipping into securities holdings for income. In another scenario, someone receiving Social Security finds a good job before they reach their FRA. Should they take the job and lose their Social Security because they’ll make more a year than the earnings test limit of $15,120? (In the months leading up to FRA, benefits are reduced if earnings go over this limit. Above FRA, people can work and still receive fill benefits.) Those months they don’t get their Social Security benefits won’t hurt benefit amounts later, however, and may actually increase those later benefits. Social Security updates the earnings history each year you work even after you start benefits; when you reach FRA, suspend your benefits to get the DRCs. These examples of Social Security strategies only scratch the surface of how decisions affect benefits. Everyone’s different and other strategies merit your attention. Point is, don’t look for answers in the Social Security office – but know as many as you can before you walk in. Follow AdviceIQ on Twitter at @adviceiq. Larry R. Frank Sr., CFP, is a Registered Investment Adviser (California) in Roseville, Calif. He is the author of the book, Wealth Odyssey. He has
  3. 3. an MBA with a finance concentration and B.S. cum laude in physics with which he views the world of money dynamically. He has peer-reviewed research published in the Journal of Financial Planning and writes Better Financial Education. AdviceIQ delivers quality personal finance articles by both financial advisors and AdviceIQ editors. It ranks advisors in your area by specialty, including small businesses, doctors and clients of modest means, for example. Those with the biggest number of clients in a given specialty rank the highest. AdviceIQ also vets ranked advisors so only those with pristine regulatory histories can participate. AdviceIQ was launched Jan. 9, 2012, by veteran Wall Street executives, editors and technologists. Right now, investors may see many advisor rankings, although in some areas only a few are ranked. Check back often as thousands of advisors are undergoing AdviceIQ screening. New advisors appear in rankings daily. Topic: Elder Care Social Security Retirement Planning

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