When to turn on your Social Security income benefits is truly an individual choice. There are many factors to consider when making this decision. Here are a few:
- Work level, energy and health.
- What affect will there be on future widow/widower’s benefits?
- Your own personal financial situation.
- Health care needs and Medicare insurance.
- Your life span — how old have your parents and grandparents lived?
- Coordination with spousal benefits.
- Cost of waiting? How many years to the break even point?
- Will the Social Security trust fund run out of money to pay my benefits?
To be sure, these issues are real and they should be considered very carefully before beginning to take benefits, because once done, this decision will last you a lifetime! Of course, there are exceptions and exemptions, but in general once you start receiving benefits they are set in stone.
While Social Security has its problems, it is still one income-stream you will most likely have available to you at retirement, so before bad-mouthing the program, let’s examine an average example of what these benefits can do for your retirement.
I’ll use my client, Alfred, who is now four years retired as an example. He is receiving $2,020 a month in Social Security benefits. Over the years, he paid FICA tax into the Social Security fund of $48,655. He has now received over $96,000 in just the first four years of retirement. Already he has recouped the taxes he paid into the system and almost doubled that amount. If Alfred lives to age 84, the average life expectancy for U.S. males, he will have received over $460,000 in Social Security benefits! This amount of income is more important to Alfred than anything he saved on his own effort.
Perhaps the government was stupid, did not know what they were doing, could not stop these benefits once they got rolling 100 miles an hour down the Social Security train track back in the 1930’s, when the program was first instigated. None of that matters now. A $460,000 payout is a great foundation for anyone’s retirement. And when you add spouse’s income, and COLA adjustments to keep up with inflation, you have an attractive asset.
Social Security can be a valuable asset, at least until the government changes the rules and adjusts these benefits downward, or simply cannot afford to pay them anymore. In the meantime, as long as they are still paying them, it makes sense for you to learn about them and plan ahead to make the most out of your benefits. For more, go to www.ssa.gov and www.moneymastery.com.