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Value Creation Blog

The Social Security Dilemma…..When Should You Start Collecting It?

Posted by Josh Patrick

The_Social_Security_Dilemma_1.pngIf this was 1965 I might be writing a post about how to take advantage of the pension plan you have at work.  For the most part, a traditional pension plan is a thing of the past.  Today, you have to depend on what you save in your individual retirement accounts as well as thinking about the choices you have with social security.

If you’ve followed this blog for any period of time you’ve heard me rant about it’s not the investments so much as the amount you save.  Knowing how much you need to save is something you need to think about.  Another decision you’re going to have to make is when to start collecting social security.

You have more choices than you think.

You have lots of choices about when you can start collecting social security.  That decision will determine how much money your monthly check will be.  The earlier you start, the lower your monthly payment from the Government.

For some, starting social security as soon as you can is the only option that’s available.  If you’ve taken my advice and have saved enough, you’ll have a choice about when to start collecting your social security payments.  Let’s think about some of the mistakes I see people make…..or at least mistakes you might make.

You might want to focus on getting the most money you can from social security.

I know way too many people who focus on making sure they get the maximum amount of money they can from the Government.  If that’s you, I want you to take a step back and think again. 

The goal is not to get the most money out of the government.  You might be asking yourself, has Patrick lost his mind?  And, that might be a good question to ask but not in this instance.

What I want you to think about is having enough money to live your life.  One of the easiest ways of doing this is to delay taking social security till you’re 70 years old.  You see, every year you delay taking social security your benefit increases by 8%.  Doesn’t getting a guaranteed return of 8% sound like a good idea to you.

If you don’t start collecting till you’re 70 the amount of money you’ll collect will be much higher than if you start earlier.  Delaying your start helps you keep money coming in when you might need it the most.  How does that sound to you?

Social Security is the defined benefit plan you wish you had.

I like to think of Social Security as a type of defined benefit plan that went away.  If you can afford to wait till you’re 70, the benefit can be very meaningful.  This is especially true if you live on $100,000 or less per year.  Social Security can be as much as 30% or even 40% of what you need to live on if you are able to wait.

The best way to find out what works for you is to do a financial plan.  You’ll learn what works best for you.  I want you to do this by running a variety of scenarios of what your retirement will look like.  Take a look at collecting Social Security early.  Then run a scenario of waiting till you’re 70 years old.  I bet you’re going to like what you see by waiting.

Social Security can be part of your safety net for living too long.

Life extension is a reality.  There’s a very good chance that you’ll end up living a lot longer than you thought.  Living too long can and does put pressure on your savings.  Having a bigger check from the Government can really help…..especially if you end up living longer than you planned.

I’m hoping that you take some time to compare taking Social Security at 70 versus when you first qualify for benefits.  The decision you make might just be the difference between living with dignity or not as you age.

What do you think?  Does it make sense to at least consider delaying taking your Social Security benefits?  Why don’t you click here and let me know what you think?

 

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Topics: retirement planning, wealth management, social security planning

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