Podcasts Business Retirement Starts Today Six Month Social Security Mulligan [Rebroadcast]

Six Month Social Security Mulligan [Rebroadcast]

Published: Nov. 28, 2022, 9 a.m.

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Deciding whether to delay filing for Social Security is a hefty decision. Waiting to collect Social Security until age 70 will increase your monthly benefit by 32%, but that doesn\\u2019t mean much if you don\\u2019t live long enough to reap the rewards of being patient.\\xa0

In today\\u2019s retirement headlines segment, I\\u2019ll share an article written by Jeffrey Levine from Kitces.com that discusses a workaround to the seemingly all-or-nothing decision of whether to collect Social Security benefits at full retirement age or to delay filing until age 70. If this decision has been weighing heavily on your mind, you won\\u2019t want to miss this episode.\\xa0

Outline of This Episode

  • [1:22] If you are a do it yourself investor you are your own financial advisor
  • [5:30] Retroactive payments are granted as a lump sum payment
  • [7:03] Use the nudge strategy
  • [9:00] Drawbacks to the 6-month nudge strategy
  • [12:48] Using QLACs and MYGAs to enhance a bucket strategy

DIY investors need plenty of tools in their retirement planning toolbox

Jeffrey Levine, the author of\\xa0Getting Comfortable Delaying Social Security with Six Month Reversible Delays, has a way of explaining complex financial concepts by breaking them into understandable bites. You can follow him on Twitter\\xa0@CPAPlanner\\xa0if you are looking for another go-to financial resource.\\xa0

Although today\\u2019s retirement headline was written for financial advisors, it contains valuable information for the do-it-yourself investor. As a DIY investor, you need to recognize that you are your own financial advisor.\\xa0Kitces.com\\xa0offers a wealth of information and is one of my favorite retirement planning resources.\\xa0

Nudging your Social Security claiming decision can lessen the worry of making the wrong choice

The biggest question that you probably have about Social Security is how big will your benefit be? The answer hinges on two factors: your earnings history and when you choose to take your benefit.\\xa0

By the time you get ready to retire, there isn\\u2019t anything you can do about your past earnings history, but you can control when you decide to collect your benefit. The longer you wait to collect, the larger your monthly check will be. Each year that you choose to wait your payment will increase by 8%.\\xa0

With lifespans continually increasing it can make a lot of sense to delay filing for Social Security. However, not everyone will live long enough to reap the rewards of delaying their monthly benefit.\\xa0

Many people see the decision to delay taking Social Security until age 70 as an all-or-nothing endeavor, but that is not the case. In fact, as Jeffrey Levine explains, this decision can actually be broken up into a series of 8 smaller decisions.\\xa0

By using the strategy of nudging the decision forward every 6 months, you can break this seemingly all or nothing choice into 8 separate, independent, reversible decisions which will lessen the fear of an all or nothing approach.

Challenges to using the every 6-month nudging approach

As with every financial strategy, there are drawbacks to using the nudge approach every 6 months. The most obvious is that if you happen to die during your wait, you won\\u2019t be able to collect the benefits. The author makes an important side note for married couples to consider this drawback. Listen in to hear what it is.\\xa0

Another downfall is that retroactive applications can reduce your lifelong benefits. Something else to consider is that if you file retroactively, you will receive retroactive benefits in a lump sum which could lead to a spike in your marginal tax rate for the year.\\xa0

Breaking down the decision of when to claim your retirement benefits into many smaller, less drastic decisions can give peace of mind to the decision-maker especially when they understand that the decision is reversible.\\xa0

Resources & People Mentioned

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