Three reasons to file early for Social Security
Originally written in Aspire, Spring 2020
Edited for clarity and brevity by Gleba & Associates
Tell us if you’ve heard this before: File for Social Security as late as possible. Sound familiar? That’s because conventional wisdom tells us that waiting at least until full retirement age will net a larger monthly payout than filing as soon as eligibility starts at age 62. Waiting even longer means an 8% increase in monthly benefits for every year delayed between full retirement age and age 70 – a potential 8% to 32% increase (a pretty impressive “rate of return” that’s hard to beat).
This assumes, of course, good health and an income and/or retirement nest egg that makes waiting possible.
While the math and logic are sound, there’s a reason this is a general rule. For the majority of applicants in good health, waiting past full retirement age to file makes a lot of sense financially. But, it doesn’t apply in every situation. If you are unsure of when to claim Social Security benefits, it’s essential to contact us at Gleba & Associates to create plans that maximize this all-important source of recurring, inflation-adjusted and – this is key – guaranteed income.
The elderly rely on Social Security for 33% of their total income.
Early Bird Gets the Worm: Reasons to File Early
If any of these scenarios apply to an individual, it would be worth it to consider filing sooner rather than later.
FOR THE MONEY
This is obvious, perhaps, but important nonetheless. Sometimes the best laid plans go awry. Someone may have to leave their job unexpectedly for health reasons; they may get burned out, or a business deal may not go as well as they hoped and they may find themselves in debt. They may also find themselves wanting – or needing – to spend more time with loved ones. If they don’t have enough savings to retire sooner than planned, they may want to think about claiming Social Security benefits early.
Since Social Security offers a consistent source of income, it can make for a great backup plan. But it’s important to really do the math and budget accordingly because it’s unlikely to be a princely sum. Monthly benefits averaged $1,461 in 2019, or about $17,500 a year. The maximum benefit at full retirement age is $2,861, about $34,000 a year.
Now, some people who have done a good job of saving still like having extra income to fund more of their wants in early retirement, perhaps preferring to let dedicated retirement savings accounts continue to grow. The extra income can enhance the so-called “go-go” years, a period where you can expect to have the most time and energy when they first enter retirement.
37% of retirees had to stop working sooner than expected
FOR THEIR HEALTH
If an individual lives to the average life expectancy, they’ll receive approximately the same amount over their lifetime, regardless of whether they start collecting benefits sooner or later. But the math only works out if they live to their late 70s, the current average American life expectancy. If you have a significant health event or family history of illness, filing early could be a smart option.
FOR BETTER OR FOR WORSE
Married couples who are the lower-earning partner will find that their lifetime benefits will also be lower. In cases like this, you can work with them to maximize their total household benefits, which could involve filing earlier, and the higher-earning spouse delaying their more substantial benefits in order to get that 8% credit for each year between full retirement age and age 70. This strategy could maximize benefits for married couples and is also likely to secure higher survivor benefits when the time comes.
WEIGHING THE FACTORS
As with many financial decisions, the best Social Security claiming strategies need to account for each individual’s personal situation – their health, savings, marital status, etc. You’ll also do well to remember that you generally are not eligible for Medicare until 65, so if you are not covered by an employer, you may need to purchase your own health insurance coverage until Medicare kicks in. Expert advice could be invaluable here since this decision affects a lifetime income stream.
Invest Well. Manage Well. Live Well.
Gary is a Financial Associate at Gleba & Associates, Inc., joining our team in June 2020. After graduating from Walsh College with a Bachelor’s Degree in Finance in 2013, he began his career at Raymond James Financial Services. He then moved to the world of banking, working as a banker with Chase Private Client and then as an Assistant Vice President, Financial Advisor with PNC Investments. Gary has expertise in all aspects of financial planning including investment management, higher education planning, life insurance, and long-term care insurance needs analysis. When he gets away from the office, he loves to spend time with his wife, Lauren, and two daughters, Hadley and Harper. He enjoys woodworking, boating, summer weekends at the family cottage, spending time outdoors and traveling.
Conor is a Financial Associate at Gleba & Associates, Inc., where he started in 2018. Conor has prior experience in the financial planning industry, as well as in the insurance industry. His high level of understanding insurance and financial products helps him in assessing the needs of our clients. He holds a Bachelor of Science degree in Business Administration with a concentration in Finance from the University of Detroit Mercy. You can often find Conor playing soccer or walking with his two dogs Milo, and Ellie. He is also an avid follower of the Detroit Tigers, Detroit Red Wings and his alma mater, the University of Detroit Mercy Titans.
Lorie Heitzer is our Financial Associate at Gleba & Associates, Inc., where she has been a valuable employee for more than a decade! In her current role, Lorie assists with client reviews, implements client financial planning, and handles preparation of investment paperwork. During her time with Gleba & Associates, Lorie has earned her Series 6 (Investment Company Variable Contracts Representative), 63 (Uniform Securities Agent) and Life Insurance Licenses, allowing her to move into her current role where she assists clients in both of these areas. Lorie and her husband Bill, along with their daughters Lauren and Alexandria, and sons-in-law, Andrew & Joe, enjoy golf and make it a family event whenever possible. Her tenure at Gleba & Associates speaks volumes to her passion for the firm’s family atmosphere and her dedication to our clients and their financial and insurance needs.
Terri is the Service Manager at Gleba & Associates, Inc., Joining the team in April, 2015. In her role, she handles client service requests and underwriting. Terri’s previous experience in 401(k) Retirement Plans, Payroll and Human Resource Administration is invaluable, allowing Gleba & Associates to grow and run efficiently. This is knowledge that can also assist our small business clients as they grow their businesses. Terri enjoys spending time with family, which includes her husband, Gerry and her two children, Vincent and Genna. She loves the outdoors and camping with family in their RV. Terri looks forward to continuing the high level of customer service you have come to expect from Gleba & Associates!
Michael is the Marketing Manager at Gleba & Associates, Inc., where he began in August 2017. In his position, Michael creates and develops marketing strategies to enhance the image of Gleba & Associates, and helps maximize the Client-Advisor relationship. He is also in charge of company events, seminars, and educational workshops. Michael has a Bachelor of Applied Arts Degree in Integrative Public Relations from Central Michigan University. When he is not in the office, Michael can most likely be found playing billiards, playing poker, on the tennis court, or rooting on the Utica Unicorns baseball team. Michael stays active by going to the gym and going to the dog park with his Labrador-mix, Milton. His approachable attitude, along with experience in marketing, communications, and social media, makes him a valuable asset to the Gleba & Associates team.
Moiz is our Financial Associate at Gleba & Associates, Inc., where he began in 2013 after working for Bank of America and Thomson Reuters in various financial roles. In his position, Moiz assists in the research of financial solutions in order to meet client’s needs, conducts client reviews, provides insurance quotes, offers detailed financial plans, and delivers follow-up services to our clients. Before moving to the United States in 2004, Moiz grew up in rural India, where he was raised in a family of entrepreneurs. This allowed him to quickly learn the value of financial investment. Moiz holds a Bachelor of Commerce Degree in Accounting from Gujrat University and a B.B.A. in Management and an MBA from Walsh College of Accountancy and Business Administration, where he was elected as a member of Delta Mu Delta, the International Honor Society in Business Administration in recognition of high scholastic attainment. Moiz enjoys spending time with his wife, Tasneem, son, Taha, and family. He also loves playing tennis and rebuilding computers. His expertise in the areas of banking, mortgage and taxation helps to provide our clients with distinct portfolio advice as well as overall financial direction and growth.