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I ’ m 59 years old and starting to think about retirement and Social Security . I haven ’ t received a statement telling me about my benefits lately and am not sure what to expect . How can I see a benefits estimate ? Social Security stopped mailing statements annually due to budget cuts , but you can expect a written statement three months before your 60th birthday . Social Security mails estimates to workers every five years , at ages 25 , 30 , 35 , 40 , 45 , 50 , 55 and 60 . You can also pull up your estimate anytime online at www . ssa . gov / retire / estimator . html . Enter your name , mother ’ s maiden name , Social Security number , date and place of birth . Social Security will provide you with a benefit estimate for your full retirement age ( 66 ), for age 70 , and for early retirement – age 62 .
What ’ s the best age to begin collecting Social Security ? You can begin collecting Social Security as early as age 62 and as late as age 70 . The longer you wait , the higher your monthly benefit will be , but you ’ ll be collecting for fewer years . Because you don ’ t know how long you ’ ll live , no one can tell you with certainty the best time to begin taking Social Security in order to maximize the amount you receive over your lifetime . However , there are some guidelines to consider as you make your decision .
By taking Social Security early , your payment is about 75 % of what it would be if you waited until full retirement age . Some people decide that this reduction in payment is worth it because they get to enjoy the money sooner , during their younger years . The “ break-even ” age for the average person who collects Social Security at full retirement age is in the late 70s . This means that if you live that long , you ’ ll be collecting more dollars during your lifetime by waiting until full retirement age and getting a larger monthly payment . Thus , if you are in good health , waiting to collect your Social Security may result in more dollars over your lifetime .
If you ’ re still earning income , you may not want to collect Social Security before your full retirement age , which is 66 for people born between 1943 and 1954 and gradually rises to 67 for those born in 1960 or later . This is because for every $ 2 you earn over $ 16,920 , your Social Security benefits are reduced by $ 1 when you take them early .
Social Security increases by 8 % for each year you wait up until age 70 – after 70 , it stops increasing , so everyone should claim benefits by that age .
I ’ m gearing up for retirement and my company is offering me a choice between a monthly pension and a lump sum of money . How do I decide which is the right option for me ? Just as there ’ s no universally correct answer on when to claim
Social Security , the choice between a pension and a lump sum can be complicated .
Those who choose a lump sum may want control over their money and to not be dependent on a company to pay them income for life . They may feel that investing a lump sum gives them potential for growth and a rising income over time , whereas a pension often does not rise with inflation .
Some choose a pension because there is no market risk and it provides income that cannot be outlived .
As you evaluate your options , consider the monthly payment compared to the lump sum and determine what percentage of the lump sum is your annual pension payment . This lets you know the annual rate of withdrawal you ’ d need to take from the lump sum in order to replicate the pension .
Are you married , close in age and in similar health to your spouse ? You may want to consider the “ joint and 100 % survivor ” option to ensure that if you die first , your spouse will continue to receive your pension . This option generally offers less money .
Your financial advisor will recommend a rate of withdrawal should you choose the lump sum , and this amount of money is likely to be lower than the pension option . If you can live comfortably on the initially lower monthly income , you may want to choose the lump sum in order to have full control over your money and the potential to grow and pass on wealth to your heirs . You must also consider whether you can be comfortable with a large investment portfolio that is subject to market volatility . If this concerns you , or if you worry that you might spend through your lump sum too quickly , then the monthly pension option may be a good choice in your situation .
This Industry Insight was written by Sara Botkin .
Sara Botkin is a Certified Financial Planner™ professional and president of Botkin Family Wealth Management in Peters Township . Visit www . botkinfamilywealth . com or call 724.941.1737 for more information . Have a question for our next “ Money Matters ” column ? Email Sara at sara @ botkinwealth . com .
Securities offered through LPL Financial , member FINRA / SIPC . Investment advice offered through Private Advisor Group . Botkin Family Wealth Management and Private Advisor Group are separate entities from LPL Financial . The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual .
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