Social Security & Another Trip Around the Sun

Last week I celebrated another trip around the sun. This birthday felt meaningful

because it puts me officially halfway to the age when I plan to claim Social Security. A

lot can change between now and then, but it is already something I think about and plan

toward.

You might be wondering what age that is. With today’s rules, I could file as early as 62. I

could wait until my full retirement age of 67. Or I could hold out until age 70.

So, which one do I plan to choose, and why?

My goal, health and life willing, is to claim at 70.

My wife and I are fortunate to be on track to retire in our mid-50s as I practice what I

preach within our own personal plans. The good news for my clients, however, is that I

do not sit still very well, so I doubt I will fully “retire” in the traditional sense. Because of

that, I plan to delay benefits as long as I can, assuming health stays on my side.

If I claimed at 62 while still working, my benefit would be reduced, and the payout would

be pretty minimal if any. Claiming at 67 would allow me to receive my full benefit, even if

I am still earning income, and that could be nice.

However, every year I delay after 62, my benefit grows by eight percent. I love the stock

market, but I do not count on a guaranteed eight percent every single year there. Social

Security gives me something I would never bet against, so I plan to wait until 70.

Now for the spouse planning side, which is just as important. My hope is that I am still

happily married to Morgan, unless she kicks me out for my repeated use of terrible dad

jokes. Since she is three years younger than me, she will reach her full retirement age

right around when I hit 70. That means she will be able to take half of my benefit with no

reduction. Meanwhile, she can continue delaying her own benefit to age 70 as well,

getting that eight percent bump up for her benefits. That gives us the best long term

household payout.

By waiting until 70 this also lets me do Roth conversions in the early years to minimize

the tax impact for me when I’m 75 and must take required minimum distributions from

my IRA or when my kids inherit the money. Doing this will not save thousands of dollars

but millions of dollars from my projections.

Now, if my health takes a turn before then, my plan flips. I would claim sooner. Social

Security pays the higher of the two benefits when one spouse passes, so delaying my

benefit would matter less than making sure we get some of my benefit before I pass at

an earlier age.

This is what works best for our situation. It does not fit everyone. Some people retire at

60 or 65 and need income right away. Others plan ahead and build strategies that allow

them to push for the eight percent growth.

There is also the small detail that this plan assumes nothing dramatic changes in the

Social Security system over the next 35 years. We will see. I am an optimist, but I also

like a backup plan.

Whatever stage you are in, it pays to think about Social Security early and build a

strategy that fits your life, your income needs, and your family. If you are thinking

through this for yourself, your parents, or someone you care about, reach out. As you

probably already know, retirement planning and wealth management are where I nerd

out.

Enjoy this beautiful November season and I look forward to sharing more value soon.

The opinions voiced in this material are for general information only and are not

intended to provide specific advice or recommendations for any individual or firm.