Decoding Social Security: Learn The Best Time to Claim Benefits

If you're nearing retirement age, you might be wondering what is the best time to claim your Social Security benefits. If so, you're in the right place. I'm going to decode the complexities of Social Security and I'm going to guide you towards making a more informed decision, so stay tuned.

Back to another edition of We're Talking Money. I'm Phil Clark, wealth advisor and founder of OmniStar Financial Group. Before we start, please don't forget: share our channel, share this information, and please subscribe for more videos on various topics related to personal finance, budgeting, investments and more. Now let's get into it.

When it comes to Social Security, there is much more than simply filing for your benefit once you reach full retirement age. If you were born in 1956 or earlier, you're already eligible. The full retirement age is 66 if you were born from 1943 to 1954, before retirement age increases gradually if you're born from 1955 to 1960, until it reaches 67. And for anyone born 1960 or later, full retirement benefits, they're simply payable at age 67.

Now keep in mind, you can receive Social Security retirement benefits as early as age 62. However, your benefit will be reduced, and it could be a significant reduction if you start receiving benefits before full retirement age. For example, if you turn age 62 in 2023, your benefit would be about 30 percent lower than it would be if you waited to full retirement, or age 67.

Social Security benefits, it's much more complicated than some might think. I would tell you that the first step that you can take is familiarizing yourself with the Social Security Administration's website. It's a treasure trove of information that will help you understand how the system works and what factors can affect your benefits.

Next, let's talk about the effect of your age. Now, generally, the longer you delay claiming Social Security, the larger your monthly benefits will be. But that doesn't mean everyone should wait until they reach full retirement age to take benefits. Actually, when you file is more accurately based on your personal circumstances. It's not a one-size-fits-all.

For example, are you in good health? Do you have a good financial game plan for retirement? Do you need additional income now? All of those things have to be answered before you can make a wise decision about when to take your Social Security.

Now that brings us to the importance of crunching the numbers, and for some people this gets a bit scary because they may not know what numbers to crunch. But analyzing your financial situation, including other sources of income, all of your expenses, it's actually quite possible to determine the optimal time to claim your benefits. Now, if you don't know how to do this, contact us and one of our advisors will be glad to get you headed in the right direction.

Remember, Social Security is designed to provide financial security during retirement, so it's essential to prioritize your long-term financial well-being rather than prematurely claiming benefits.

Now let's delve into some smart claiming strategies. These are the things that clients ask us about all the time. For couples, there are spousal and survivor benefits that can significantly affect your overall retirement income. It's also important to explore these options carefully, and you really need to understand how they fit into your situation. Again, we said it's not one size fits all.

So, for example, spouses who never worked, or maybe they just had a very low earnings rate throughout their career, did you know they can get up to half of a retired worker's full benefits, even in the case of a divorced spouse?

Other considerations could include things like pensions, and some pensions that opt out of Social Security taxation would mean that you would get a reduction in your Social Security. Knowing how to plan for that is very important.

Are you still employed, and what are your total earnings? All of these things have a significant effect on how much of your Social Security you get to keep and whether you will pay ordinary income tax on those benefits. And you heard me right when I said ordinary income tax; that's exactly what I meant. Did you know that about 40 percent of people who get Social Security, they pay ordinary income tax on as much as 85 percent of their Social Security benefits?

Lastly, let's consider the broader context. Now, external factors such as your savings, other retirement accounts, or even your desire to continue working during retirement, all of these things can greatly influence when the ideal time is to claim your Social Security benefits.

And Social Security affects more than the person claiming this benefit. Remember, spouses, even if they never worked, can qualify for benefits, as well as unmarried children up to age 18, and if they're a full-time student, age 19, and those who are disabled.

In conclusion, deciding when to claim your Social Security benefits, it's a personal and complicated decision. It's an important decision, one that you shouldn't take lightly. I hope today's episode has inspired you to start researching, analyzing your circumstances, and even seeking professional advice so that you can make an informed choice that sets you up for a fulfilling and financially secure retirement.

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