You worked hard throughout your life, you paid into social security, and now you’re looking forward to enjoying your retirement. Social security planning is a major part of entering retirement and can play a major role in how you are able to enjoy the years after work.
For about half of older Americans, social security makes up over half of their household income. As you can see, social security benefits are incredibly important for maintaining the quality of life in retirement. Effective social security planning is one of the most important considerations as you enter your golden years.
Keep These Important Facts in Mind
In this article, we will cover some of the most important social security facts that will help you have better, deeper conversations about your social security planning.
Good planning is key to truly making the most of your retirement years:
1. You Don’t Have to Start Collecting Right Away
Many people incorrectly assume that they have to start collecting social security as soon as they retire. For some, collecting social security may be necessary to pay for living expenses. However, waiting could actually be more beneficial if you are able to manage your expenses.
Waiting until full retirement age before collecting social security benefits could mean up to an extra 30% per month in your pocket. This is why saving money above and beyond social security benefits is important. Savings can help you live comfortably while waiting until full retirement age in order to maximize your social security payments.
2. You Can Stop Collecting – Even if You Already Started
One common thing that occurs with retirees is that they opt for taking social security payments, even if they have additional savings. They look at their expenses and believe they need the extra money. However, over time, they find that their expenses in retirement are not as significant as they expected and they wish they had waited for full retirement age.
The good news is that, if you catch this within one year, you can change your decision.
This is why social security planning and regular financial reviews are important. Understanding your needs and the options available allows you to make the best decisions and change your strategy if needed.
3. Social Security is Not Meant to Replace Your Entire Income
When going through social security planning it is important to understand the limitations of social security. The program, for most people, is not designed to replace their entire income. In fact, a good rule of thumb is to assume that social security will replace about 40% of your pre-retirement income.
Of course, this percentage will be higher for low-income workers and lower for high-income workers. In any case, having additional savings for retirement can ensure that you do not feel a major shock from reduced income in retirement.
4. Start Your Social Security Benefits One Month Early
Many people find out the hard way in retirement that social security benefits are paid out the month after they are due. For example, if you elect to receive benefits in April, you won’t actually get a payment until May.
If you are relying on getting a social security payment in a specific month, be sure to elect to start receiving benefits the month previous. Otherwise, you will be left waiting an extra month and this could be difficult if you are on a tight budget.
Take the Stress Out of Social Security Planning
Social security planning does not have to be a stressful time. With the right people in your corner working for you, you can be confident that your retirement will be fun and relaxing rather than stressful.
If you would like a personalized look at your retirement plan, please contact us at Mooney Lyons today!
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.