A bad decision on Social Security collection benefits can cost you as much as $200,000 over you and your spouse’s lifetime. There is a lot of misinformation and scare tactics being disseminated to clients. Social Security will be there for those 60-plus so making a good decision based on facts can be one of the most important decisions of your life. Your wealthiest clients can afford not to take Social Security payments at age 62. So when should they take it? It all depends.
If they are in good health, the primary bread winner should wait until he or she is 66 years old and reaches their full retirement age and should then apply for benefits and suspend those benefits until he or she reaches age 70. For this purpose, let’s use that he is the primary bread winner and she is a stay-at-home spouse. He will then accumulate credits at 8% monthly plus the cost of living allowance each year until he reaches the full retirement age. Once he has applied for benefits, the spouse can apply at her full retirement age – 66 – and collect half of the benefits. At age 70, he will begin taking benefits at 132% of his full retirement age. This is referred to as their primary income account, or PIA. When should clients begin collecting Social Security? Here is where it gets interesting. If the husband passes away after the age of 70, the spouse will collect 100% of the husband’s PIA or primary income amount, until she passes away. This is the real planning benefit since the spouse’s mortality tables have her living to age 91 if, in fact, she reaches the age of 65. If she is wealthy and in good health, her chances of living past 100 are very high. Remember, mortality tables are for all Americans. If you have taken care of yourself, have good genes, wear seat belts, and have excellent regular check-ups and have access to good medical care, your longevity is much greater. Once you live past age 65, your longevity is now 85 for a male and 91 for females. That is the good news/bad news. By following this deferred gratification model, you can further ensure that if you do live into your 100’s you will have the money. This may be the best long-term care planning out there. If one spouse has a high likelihood of outliving the other for a substantial amount of time, the couple’s best overall strategy may involve maximizing survivor benefits.
Check with Blackrock Advisory Consultants for a personalized analysis of your clients regarding Social Security benefits; they have some great material.