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Timestamps:
0:00 2 Alternative Ways to Think About Delaying…
0:20 Two Most Important Breakeven Variables
2:05 #1 – Social Security as a Safe Asset
5:25 Dynamic Portfolio with Your Claiming Strategy
7:53 #2 – View Social Security as Insurance
Eric Sajdak, ChFC, NSSA, is the head of research here at Safeguard Wealth Management and has earned his National Social Security Advisor designation.
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This Social Security Strategy Will Improve Your Retirement: 2 Ways to Consider Delaying
When it comes to planning for retirement, many factors come into play, including managing your savings, investing wisely, and making decisions regarding Social Security benefits. While most of us are aware of the importance of Social Security in our retirement plans, not everyone is aware of the benefits of delaying the start of their benefits. In fact, delaying Social Security can significantly improve your retirement and provide you with a more secure financial future. Here are two ways to consider delaying Social Security and maximize your retirement benefits.
1. Take advantage of delayed retirement credits:
One of the most notable advantages of delaying Social Security is the opportunity to earn delayed retirement credits (DRCs). DRCs are additional benefits that can be earned by delaying your Social Security benefits beyond your full retirement age (FRA). For each year you delay, your benefits are increased by a certain percentage, up until the age of 70. By waiting until age 70 to claim your benefits, you can potentially earn up to 32% more than you would receive at your full retirement age. This can result in a significant increase in your monthly payout, providing you with a higher standard of living throughout your retirement years.
While it may be tempting to start claiming your Social Security benefits as soon as you reach your full retirement age, it is important to weigh the benefits of delaying against your individual circumstances. If you have other sources of income to support your retirement or have a longer life expectancy, delaying your Social Security benefits may be a smart strategy to consider.
2. Utilize spousal and survivor benefits:
Another valuable aspect of delaying Social Security is the potential impact on spousal and survivor benefits. If you are married or have been married for at least ten years, you may be entitled to spousal benefits based on your spouse’s work record. By delaying your own benefits, you can also maximize the spousal benefits that your spouse may receive. This can be particularly advantageous if one spouse has significantly higher lifetime earnings.
In addition, delaying your Social Security benefits can increase the survivor benefits for your spouse in the event of your passing. Survivor benefits are typically based on the higher-earning spouse’s benefits. By delaying your own benefits, you can increase the base amount upon which the survivor benefit is calculated. This can provide your spouse with a more substantial income stream, ensuring their financial security after you are gone.
It is essential to consider your unique circumstances and consult with a financial advisor or Social Security specialist when making decisions about your retirement and Social Security strategies. They can help you understand the potential impact of delaying your benefits, taking into account factors such as your life expectancy, overall financial situation, and spousal benefits.
In conclusion, delaying Social Security benefits can be a smart strategy to improve your retirement. By taking advantage of delayed retirement credits and maximizing spousal and survivor benefits, you can ensure a more secure financial future for both you and your loved ones. As with any financial decision, careful planning and consideration of your individual circumstances are key to making the best choice for your retirement.
Delay if the rate of return of your portfolio doesn't beat the rate of return for social security AND you expect to live longer than the break even age.
This is outside of other reasons to delay, like having more time to do tax conversions, working longer, etc.
But thanks Eric for all the videos that you do
What a bummer that I have to have a minimum of $2million in my retirement accounts for Safeguard Wealth Management
To even consider managing my money
It seemed to me retiring at 55 that drawing down my 401k and building up my SS to take at 70 had many safety and tax advantages.
This may be good advice for those close to retirement but what about those who are retiring in 20 years and expect SS to either provide much less at best and nothing at worst? I’m seriously thinking of taking it at 62 because I’m not sure there’ll be anything left by the time I’m 70.
Should inflation also factor into this? Even if you are lucky enough to get 8-9% return on investments, that's only 6% after taxes and with inflation at 6% you are just breaking even.
And neither can be accurately predicted.
In my opinion the best way to be certain that you will not run out of money in retirement is to have plenty of money going into retirement! Indeed, sometimes you just need more money.
About Social Security, everybody has an opinion on when to start. Do your own analysis, and then do what you think is right. It is an actuarial computation so it is difficult to make too big of a mistake.
You are not going to be healthy forever and will not live forever. Don't sweat all these little details.
You need to also include quality of life. Retirement isn't all about math… will you be healthier and have more energy at 62 vs 85? What use is a bigger SS payment when you are beddriden in a diaper?
Anyone know if it's smart to overpay taxes when withdrawing from 401K?
Create your own infrastructure and what does this mean: Be rich enough to not care about Health Care, Debt and Retirement. These three infrastructures make you subject…we need to be objective about money. These are also the three things making you poor and irrelevant. They will grind you into dust as Stalin
I have never regretted delaying SSA. Once I saw how much cash would have been left on the table, I buckled down. Coupled with the RMD being delayed after every Senate bill passed, I think I finally know what that IRS RMD will be, barring legislation.
Except SS is going bankrupt!
Variable 3: Portfolio Return & Roth IRA.
Without a Roth IRA, I'd delay drawing on social security (from 67 to 70).
With a sizeable IRA, I'd be drawing on social security early (age 62).
My avoided federal/state, IRMAA & NIIT avoided tax & medicare premiums, on Roth withdrawals, is 42.3%. Thus, this tips the scale to drawing social security early, as my optimal choice. My portfolio is 100% stock & I have a sizeable Roth IRA. I turn 62 next month.
Eric, as you were going over the spend your bond allocation first as you delay social security I could not help but to call this a bucket strategy.
And then when you introduced the 40/60 allocation that progress to a 75/25 portfolio I could not help but to call this a Mike Kitces type "Rising Equity Glide Path" .
These two strategy's are both great to make sure you don't run out of money before you run out of life.
Thank you there is some great content in this video.
Unless you have at least double the money you want at the point of retirement, counting on an 8-10% return is nuts in a distribution phase. You just can’t count on that return. The way that the numbers are usually presented requires a ridiculously low withdrawal rate over 30 years to protect from the 10-20% failure rate.
Totally agree on the insurance and longevity protection for persons with modest portfolios that Social Security can provide.
I know this because I watched our parents take early, run out of money and live close to the poverty line. If they had delayed even just 2-3 years they would have been way better off.
This is great info, worth watching more than once.
Another variable is if Republicans are able to cut social security in the future as some of them have suggested.
Could you also show an analysis of the tax benefit of Social Security income vs investment income since only a maximum of 85% Social Security income is taxed?
Even if I waited and had a big SS benefit I don't think I could handle the volatility of a 75/25 portfolio.
how can i hire this gent?
This was great. Well done.
Best explanation I have heard is to look at SS as a 'Life' asset and portfolio as a 'Legacy' asset. So, if you will live long … file SS later, if you will not, file SS sooner … as you say. In this manner, you both maximize usage of the 'Life' asset and maximize potential for the 'Legacy' asset (upon death).