4 Vital Strategies to Keep Every Social Security Dollar You Deserve

4 VITAL STRATEGIES

to Keep Every Social Security Dollar You Deserve

Don’t neglect an asset potentially worth more than $1.4 million.1

WEALTH ENHANCEMENT GROUP CAN HELP. Your Social Security is a big asset—potentially exceeding a million dollars—and poses a number of complex decisions requiring financial projections as well as knowledge of the law. Therefore, we suggest you consult a financial professional before you file for benefits.

Social Security amounts to more than you think, so don’t settle for less than you deserve.

79% of retirees leave money on the table.

The difference could amount to over $275,000.

It’s not as simple as delaying benefits to age 70.

At Wealth Enhancement Group, we help you plan your Social Security filing strategy as part of our Roundtable™ team approach addressing all aspects of retirement financial planning.

We use these four vital strategies to help maximize your Social Security benefits:

According to a study by the AARP2, that’s the percentage of recipients with reduced benefits because they claim too early. What’s more, that reduction is usually permanent; Social Security rarely offers second chances to change your filing decision.

See how age at filing alone could impact a hypothetical married couple in the chart below.

Age both file for benefits

62

67

70

Total benefits received1

$1,156,943

$1,392,253

$1,432,256

1

Pinpoint the Optimal Age at Which to Claim Benefits

2

Consider the Impact of Working in Retirement

3

Employ Effective Tax Planning

4

Factor in Options Based on Marital Status

Your financial situation, your life expectancy, your marital status, your income, tax situation, and more mean you need a Social Security filing strategy tailored specifically to you.

Hypothetical estimate of lifetime benefits assumes a high earner receives the maximum 2021 FRA of $3,148. Low earner FRA is assumed to be $0 and receives Spousal and Survivor Benefits. Life expectancy of high earner is 85; low earner is 92.

A 2% Cost of Living Adjustment (COLA) included in calculation.

2 Source: AARP, 2019, “Why Wait to Take Social Security? Optimal Timing Means You Earn More”. www.aarp.org/retirement/ social-security/info-2019/take-benefits-early-lose-money

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ONE

PINPOINT THE OPTIMAL AGE AT WHICH TO CLAIM BENEFITS

It’s important to note that, generally, once you apply for benefits, the effect on your benefits is permanent. In other words, apply before FRA and your benefits will be reduced for your lifetime; apply later, and the increases will be for your lifetime as well.

While in practice the decision to begin taking your Social Security benefits may be more complex, the principle is simple: The later you begin receiving benefits—up to age 70—the larger those benefits will be. The Social Security Administration accomplishes this as follows: •

•

•

The rule would seem to be simple: The longer you can wait before collecting Social Security benefits the better, until age 70. But this is not always the case.

The full retirement benefit is based on applying for benefits at full retirement age (FRA), currently age 66 for those born 1943–1954 and a few months older for those born in later years.

For every year you wait after FRA to apply for benefits, up until age 70, you get an increase above that full benefit. For most Baby Boomers, that increase is 8% per year, or a total of 32% if you wait the full four years until age 70 to apply.

• You need income right away to cover expenses.

Reasons to start drawing benefits early:

You can apply before FRA, as early as age 62, and receive a reduced benefit. For those born 1943–1954, that is a reduction of 25%; that is, you would receive only 75% of the full retirement benefit. $1,200,000

• You care for a child who is disabled or under the age of 16.

• You’re the lower earner and your spouse will continue working.

• You would rather take payments early and invest them.

$1,118,509

$1,100,000

$1,019,678

$1,000,000 Lifetime (accumulated) value of benefits

• You don’t expect to live to old age.

$900,000

$851,039

$800,000 $700,000

Reasons to wait until FRA or beyond, until age 70:

• You want to maximize your benefits over the long term.

• You’ll continue working and don’t want it to affect your benefits.

(See next section.)

• You are the higher earner and want to ensure the largest benefit for your spouse, should you pass away first.

$600,000 $500,000 $400,000 $300,000 $200,000

THE BOTTOM LINE

$100,000

When to start claiming benefits is perhaps the most

$0

62

64

66

68

70

Elect at age 62

72

74

76

78

80

Elect at age 67 (FRA)

82

84

86

88

90

92

Elect at age 70

complex decision of all. You need a financial advisor who will consider Social Security in the context of your entire financial situation.

Source: Social Security Administration, www.ssa.gov *Estimates are shown in today’s dollars and based on assumptions for someone born 1/2/1960 earning the Social Security wage base maximum. No cost of living adjustment, inflation estimates or reinvestment rate are included.

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TWO

CONSIDER THE IMPACT OF WORKING IN RETIREMENT

EMPLOY EFFECTIVE TAX PLANNING

THREE

Many retirees plan to continue working, most often part-time. While this is a great way to stay active and maintain a steady income, working in retirement can reduce your Social Security benefits. Important rules to know are:

Whether or not you continue to work, you will undoubtedly continue to pay taxes. It’s important to know that Social Security benefits are taxable for all except the lowest income retirees.

• Before you reach FRA: Any work earnings above $18,960 (2021 limit) will result in a $1 reduction in benefits for every $2 you earn above the limit.

Only individuals with “provisional income” under $25,000 ($32,000 married filing jointly) have tax-free benefits.

Otherwise, up to 85% of your Social Security benefits may be included in taxable income, per the chart below.

• In the year you reach FRA: Any work earnings above $50,520 (2021 limit) will result in a $1 reduction in benefits for every $3 you earn above the limit.

• After you reach FRA: Your work earnings will not affect your Social Security benefits, no matter how much you earn.

The second point is complex because the limit applies only to the months before you reach FRA. For example, if you reach FRA on March 1, 2021, you can earn up to $50,520 in the first two months of the year, and an unlimited amount after March 1—all without affecting your benefits.

“

Working in retirement can be a great way to supplement income. It can also significantly reduce your Social Security benefits. Be sure you know the rules so you can budget accordingly.

THE BOTTOM LINE If you plan on working, it’s probably a good idea to wait until FRA (or beyond) to claim benefits, so as to avoid a reduction in benefits proportional to your work earnings.

Tread carefully and be sure to obtain professional advice.

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PROVISIONAL INCOME

% OF BENEFIT TAXED

Single

<$25,000 $25,000 - $34,000 >$34,000

0% 50% 85%

Married Filing Jointly

<$32,000 $32,000 - $44,000 >$44,000

0% 50% 85%

It’s important to realize that in determining Social Security taxation, “provisional income” includes practically every source of income, including: Job earnings

Investment returns

Pensions

Dividends

Annuities

Even interest from tax-exempt bonds!

THE BOTTOM LINE Maximizing your Social Security benefits—and your overall retirement wealth—requires careful consideration of tax status based on your combined income from all sources. Just as in tax planning before retirement, you need to organize your postretirement earning strategies to be tax-efficient.

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FOUR

FACTOR IN OPTIONS BASED ON MARITAL STATUS WIDOWED

Your marital status has an enormous impact on your claiming options. Depending on your status, it can be an extremely complex decision—and choosing the “easy” way is why some people lose out on the opportunity to maximize their benefits. Here’s a brief overview of your options by marital status.

If you are widowed, you may receive 100% of your late spouse’s retirement benefit, which may be higher than your own benefit or a spousal benefit. If you are receiving Social Security benefits when your spouse dies, you are eligible to have your benefits increased to those of your late spouse.

MARRIED Married couples face a number of complexities including whether or not to claim a spousal benefit, which is 50% of the other partner’s retirement benefit.

In general: •

Couples with similar earning histories usually are best off both applying for their own benefits.

•

A spouse who did not work, or who was lower-earning than the other, may be better off taking the 50% spousal benefit based on the partner’s earning history.

•

Generally, both spouses are best off waiting until FRA or beyond to claim benefits. One exception is if you have a child under the age of 16 or who is disabled. Another exception is in the case of serious illness and/or shortened life expectancy.

DIVORCED If you are divorced and your ex-spouse is a higher earner, you may come out ahead by claiming a 50% spousal benefit based on their earnings history.

•

Your ex-spouse does not need to approve your spousal benefit, and it will not affect their own benefits. You do, however, need to have been married to that individual for 10+ years, as well as be currently unmarried.

•

If your ex-spouse qualifies for but has not yet claimed benefits, you may still claim the spousal benefit, provided you’ve been divorced for at least two years.

•

If your ex-spouse dies, you may claim 100% of that late ex-spouse’s retirement benefit, even if another spouse or ex-spouse is claiming that same benefit.

(This will likely come as a pleasant surprise to many divorced people!)

SINGLE, NEVER MARRIED As in other aspects of life, your Social Security choices are simplified. There is no benefit to claim other than your own.

THE BOTTOM LINE File the wrong way, and you could lose thousands. You can’t count on Social Security to give you advice; they won’t. Working with a financial advisor who knows the rules not only helps simplify your decisions, but it may also help to maximize your benefit.

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THE WRONG FILING DECISION COULD RUIN YOUR RETIREMENT. Why burden yourself with managing multiple financial relationships and tracking disparate accounts—or manage the stress of doing it all on your own? You need a plan that brings everything together and simplifies your financial life.

You need Wealth Enhancement Group. Our 3-step UniFi™ process helps ensure your financial life is organized, comprehensive and straightforward, enabling you to make more confident decisions and be relieved of the stress that comes with managing your wealth.

ALL THE SPECIALISTS YOU NEED, ALL IN ONE PLACE. If you’re overwhelmed by the high-stakes decisions related to Social Security and retirement income planning, we can help.

At Wealth Enhancement Group, we simplify your entire financial life through our 3-step UniFi process and our Roundtable team approach.

Just call us today at 1-888-208-4272 to learn more.

Your financial life will be considered from all angles, including Social Security, retirement income planning, tax strategies, investment management, estate planning and insurance. When your needs require specific expertise, our Roundtable team of specialists and advisors will be there to deliver strategies that integrate with your plan.

UniFi

TM

While your circumstances may change and your goals may evolve, you’ll always have a plan and just one place to turn for your financial needs. And we’ll do it all for what some others charge for investment management alone.

To schedule an appointment with an advisor,

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A 3-step process designed to simplify your financial life

Organize.

Collaborate.

Guide.

We collect your financial information and consolidate it into your UniFi Inventory™.

Our Roundtable™ team approach helps ensure your financial plan is covered from every angle.

We clarify your options and put your plan into action, supporting you every step of the way.

• • • • • •

Financial planning Retirement income planning Tax strategies Investment management Estate planning Insurance

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Take the complexity out of Social Security.

CALL US TODAY. 1-888-208-4272 Schedule a free, no-obligation meeting to learn how our 3-step UniFi™ process simplifies your financial life.

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Advisory services offered through Wealth Enhancement Advisory Services, LLC (WEAS), a registered investment advisor. Certain, but not all, investment advisor representatives (IARs) of WEAS are also registered representatives of and offer securities through LPL Financial, member FINRA/SIPC. Wealth Enhancement Group and WEAS are separate entities from LPL. Wealth Enhancement Group is a registered trademark of Wealth Enhancement Group, LLC. 1-05122019 3/2021