How a Social Security benefit is calculated (Part 3).
By Duane J. Silbernagel
The past two weeks we’ve discussed how a Social Security benefit is calculated and what the ramifications are for filing early. This week we will discuss options available for individuals who may want to take a delayed benefit.
When it comes to filing for Social Security after full retirement age (FRA), it could be advantageous to do so. For every month after FRA that a benefit is delayed, you receive an increase in the monthly amount you’ll receive – for the rest of your life.
Looking back to last week, we have this pool of money that represents the working lifetime benefit. When Social Security was established the benefit was intended to start at an individual’s FRA. For each year you delay retirement after your FRA, your SS benefit will be increased by a certain percentage based on your year of birth. So how does the Social Security Administration calculate the increase? Please refer to the table below from the Social Security Administration website, ssa.gov.
Retirement Risk Considerations
When it comes to risks while living in retirement here are a few to consider, this list is not all-inclusive:
Market risk – is the chance that an entire group of investments, like U.S. stocks, will lose value (as opposed to one particular stock falling in price). Given what transpired in 2008, there is still hesitation when it comes to fully retiring. What steps need to be taken to reduce the likelihood of that?
Inflation risk – inflation causes money to decrease in value at some rate, and does so whether the money is invested or not. With very little control regarding monetary policy, which affects interest rates, and how that impacts the prices of goods, considerations need to be made as to what can be done to help protect assets from losing purchasing power?
Liquidity risk – the risk that arises from the difficulty of selling an asset.
The power in money is the ease at which one can access the funds. Where are your assets now – real estate, investments or insurance products, etc.? How liquid are your assets?
Healthcare is a growing concern for those planning on retiring. Costs are rising, so how will one pay for those expenses?
Aging could potentially limit the ability to work a part time job to supplement other retirement income sources.
Depending on what the retirement goals are, these risks may impact each individual’s situation in a different manner. One risk not mentioned above is longevity. With incredible developments in medicine and technology, people are living into their 80’s, 90’s, etc. What does that look like on a retirement portfolio? Will the money last?
Delaying may be a fantastic option for some, while circumstances may prevent others from considering it. There is no right or wrong decision because no one can predict what the future holds. Social Security has a lot of flexibility. The most important factor is to tie this in to your overall financial and retirement plans.
If you’d like to review your Social Security benefits with me, visit my website: www.duane.wrfa.com. You’ll find numerous ways to contact me. I’d love to review your financial situation with you and help create a plan to incorporate and possibly maximize Social Security at retirement.
Thank you for reading.
This article is meant to be general in nature and should not be construed as investment or financial advice related to your personal situation. Waddell & Reed does not provide legal or tax advice. Please consult with a professional regarding your personal situation prior to making any financial related decisions.
Duane Silbernagel is a Financial Advisor in Lincoln City, Oregon offering securities through Waddell & Reed, Inc., Member FINRA and SIPC. He can be reached at (541) 614-1322, via email at DSilbernagel@wradvisors.com.
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