5 Factors to Consider Before Claiming Your Social Security Benefits

Discover a few key considerations to keep in mind as you build your Social Security benefits strategy for retirement.

Help Maximize Your Retirement Income with a Smart Benefits Strategy

Did you know that when Social Security was first introduced in 1935, its primary purpose was to act as a safety net for retirees who lacked sufficient savings, rather than serving as their main source of income during retirement? Fast forward to today, and we’ve witnessed a significant shift in attitudes towards Social Security. Many retirees now heavily rely on these benefits, with Social Security accounting for approximately 30% of retirees’ income this year. As you contemplate your own retirement income plan, we think it’s essential to acknowledge that diversifying your income sources is crucial. However, we firmly believe that having a well-thought-out Social Security benefits strategy for optimizing your benefits is equally as important.

As you think about how your Social Security benefits may play into your larger financial plans, read on for some key considerations to keep in mind as you build out your benefits strategy.

Social Security Benefits Strategy Consideration #1: Understand the Basics of Social Security

Before diving into a strategy, it’s essential to have a solid understanding of the Social Security system. Social Security is a federal program that provides retirement, disability, and survivor benefits to eligible individuals. Your benefit amount is calculated based on your earnings history, specifically your highest 35 years of inflation-adjusted earnings.

Your Full Retirement Age (FRA) is a pivotal factor in determining when to claim benefits. FRA varies depending on your birth year, but it typically falls between 65 and 67. Claiming benefits before FRA will result in reduced monthly payments while delaying claiming beyond FRA can lead to increased benefits.

Social Security Benefits Strategy Consideration #2: Consider Your Longevity

One of the most critical aspects of your benefits strategy is considering your life expectancy. While none of us can predict our exact lifespan, your family history, current health, and lifestyle choices can offer valuable insights. If you expect to live a long and healthy life, delaying Social Security benefits could be a wise choice.

SEE ALSO: Do You Have a Retirement Income Strategy?

When you delay your benefits beyond your FRA, you can receive an 8% increase in your benefit amount each year until you reach age 70 – giving you higher monthly payments. So, if you’re able to, delaying your benefits can ultimately lead to more money in the long run. However, if you have health concerns or anticipate a shorter life expectancy, claiming benefits earlier might be more beneficial.

Social Security Benefits Strategy Consideration #3: Assess Your Financial Needs

As you think about how your Social Security benefits may fit into your financial plans, you’ll want to think about your current financial situation. Before making any big decisions, take time to evaluate your overall financial health, including your retirement savings, other sources of income, and expenses. If you have a substantial retirement nest egg and can cover your expenses without relying heavily on Social Security, delaying benefits may be a prudent choice.

On the other hand, if you have limited savings and need extra income to cover essential expenses, claiming benefits early might be necessary. Additionally, consider other sources of retirement income, such as pensions, 401(k) plans, or investments, to determine how Social Security fits into your overall retirement income plan.

Social Security Benefits Strategy Consideration #4: Account for Spousal Benefits

For married couples, it’s essential to factor in spousal benefits when developing your Social Security strategy. Spousal benefits allow one spouse to claim benefits based on their partner’s earnings history, even if they have little or no work history themselves. These benefits can be particularly advantageous when one spouse has significantly higher lifetime earnings.

Couples should carefully coordinate their Social Security claiming decisions to maximize their combined benefits. Strategies may involve delaying one spouse’s benefits while the other claims early or taking advantage of the “file and suspend” strategy, which allows one spouse to claim spousal benefits while the other delays their own benefits.

SEE ALSO: Tips for Planning for Retirement as a Couple

Social Security Benefits Strategy Consideration #5: Understand the Impact of Earnings

If you plan to continue working while receiving Social Security benefits, it’s essential to understand the impact your earnings may have on your benefits. The Social Security Administration has an earnings limit for individuals who claim benefits before reaching their FRA, and if you exceed this limit, a portion of your benefits may be temporarily withheld.

In the year you reach your FRA, the earnings limit is higher, and you can earn more without a reduction in benefits. Once you reach your FRA, there is no earnings limit, and your benefits will not be reduced, regardless of how much you earn. So before claiming any benefits, be sure that you adequately research how your earnings may influence the benefits you’re eligible to receive.

Developing the Right Social Security Benefits Strategy for Your Retirement

Successfully navigating the Social Security planning process requires a deep understanding of the system and how each strategy aligns with your broader financial objectives. It’s essential to remember that each individual’s circumstances are distinct and unique. To make well-informed decisions, consider evaluating your options in partnership with a financial advisor who can analyze your Social Security strategy in the context of your comprehensive financial plan, providing personalized guidance. By adopting the appropriate approach and seeking customized advice, you can unlock the full potential of your Social Security benefits and enhance your peace of mind as you progress toward a financially secure retirement.

At Aviance Capital Partners, we specialize in helping individuals like you develop personalized strategies for a secure future. If you’d like help optimizing your Social Security benefits and better securing a financially sound retirement, contact us today for a consultation. Your retirement dreams can be within reach – take the first step with Aviance Capital Partners.

Aviance Capital Partners, LLC (“ACP”) is an SEC registered investment adviser located in Naples, Florida. Registration as an investment adviser is not an endorsement by securities regulators and does not imply that ACP has attained a certain level of skill, training, or ability. While the information presented is believed to be factual and up-to-date, ACP does not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of ACP as of the date of publication and are subject to change. Not all services will be appropriate or necessary for all clients, and the potential value and benefit of the ACP’s services will vary based upon the client’s individual investment, financial, and tax circumstances. The effectiveness and potential success of a tax strategy, investment strategy, and financial plan depends on a variety of factors, including but not limited to the manner and timing of implementation, coordination with the client and the client’s other engaged professionals, and market conditions. This should not be construed as specific investment, financial planning or tax advice tailored to an individual reader. ACP suggests that readers consult a financial professional, attorney or tax advisory professional about their specific financial, legal or tax situation. Past performance does not guarantee future results. All investment strategies have the potential for profit or loss, and different investments and types of investments involve varying degrees of risk. There can be no assurance that the future performance of any specific investment or investment strategy, including those undertaken or recommended by ACP, will be profitable or equal any historical performance level. Additional information about ACP, including its Form ADV Part 2A describing its services, fees, and applicable conflicts of interest and its Form CRS is available upon request and at https://adviserinfo.sec.gov/firm/summary/146597. 

For current ACP clients, please advise us promptly in writing, if there are ever any changes in your financial situation or investment objectives, if you wish to impose any reasonable restrictions to our management of your account, or if you have not been receiving at least quarterly account statements from your account custodian. 

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