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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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