How to Master the Art of Social Security Timing

By the time you reach retirement, you’ve been saving for many years. Naturally, you want to get the most possible out of your retirement, including your Social Security. That is why it’s so important to optimize the timing to maximize your financial success in retirement. At REAP Financial, we want everyone to get the highest possible benefit from their social security. In this article, we’ll cover the art of Social Security timing and how to make sure you time your benefits for the maximum gain, including one of the most overlooked strategies that can cost you big.

When it comes to optimizing your Social Security timing, there are a lot of claiming strategies out there. Many years ago, the main strategies were called “File & Suspend” and “Restricted Application.” These strategies were very lucrative claiming strategies, but legislative changes have since taken those strategies off the table. This led many to believe there is no longer any way to time Social Security benefits. However, this isn’t true. In fact, your Social Security may be the greatest asset you have. After many years of paying into the system, you deserve to get the maximum benefit out. Below we’ll cover some of the tips and tricks of Social Security timing.


Social Security Timing: the Common Wisdom

At REAP Financial, we work with many families heading towards retirement. Oftentimes, our clients tell us they’ve heard the optimal strategy regarding Social Security benefits is to defer until the maximum age, 70 years old. For many Americans, this is the right strategy, especially if you don’t have adequate savings to stretch through your lifetime. While this strategy may be best for some retirees, it is not a one-size-fit-all solution. For families with significant assets, who have done a great job saving, it may be beneficial to take Social Security benefits early. There are many reasons why this could be the case, but the most common are the impact of taxes and required minimum distributions

Many resources on Social Security timing don’t talk about these factors, since often they talk about retirement finances in terms of gross numbers, not the net numbers. They don’t typically get into the details of required minimum distributions and how that can raise you into a higher tax bracket and raise your Medicare premiums. 

Longevity also plays into it. If you don’t expect to live a long time, you may want to consider taking your Social Security benefits earlier. This should be a key consideration in defining your claiming strategy. In theory, the longer you live, the more money you can get out of the system. While this is all guesswork, since no one can know exactly how long they’ll live, it is important to consider when you’re defining your Social Security claims strategy. For more information on this and other topics related to Social Security benefits, you can always tap into our resources at REAP Financial’s website for more information. 

How to Time Your Social Security Correctly

When it comes to your Social Security claiming strategy, it is important that you engage with a professional to ensure you are maximizing your benefit. At REAP Financial, we have tools and software that allows us to input your net worth, expected longevity, tax bracket, Medicare premiums, and more to optimize your claiming strategy. This is crucial since the most critical piece of information is determining what your income tax bracket is going to be in retirement. This information then informs many retirement decisions, including when you should begin to take your Social Security benefits. Although we cannot predict what future tax rates will be, we can project into the future based on the best information available today and adjust that planning accordingly. 

Another thing we help our clients navigate is whether or not they are candidates to take Social Security early. When we see someone is eligible to take Social Security early, their breakeven age is generally around 95 or 96 years old. Even if they qualify, not everyone wants to follow this strategy, since it’s hard to believe most of us will live that long. Most of the articles you read will say the breakeven age is somewhere between 79 and 83, if you take your benefit at 70. In this case, breakeven is the age you’d have to reach to receive the same net benefit you lose by opting to not take your benefit early. However, that doesn’t include the net benefit amount. 

If you have a net worth of $1.5 million or more, there is about a 50% chance that you’ll be a candidate to take Social Security early, depending on your longevity, employment status, and desired retirement age. If you plan to continue working, you probably won’t want to take Social Security early, since there are earnings caps, which can erode your benefits. If you don’t take the benefits early, there is no such penalty or earnings cap once you reach the full maximum deferment age. 

Voluntary Suspension: An Overlooked Social Security Strategy

One of the overlooked strategies for Social Security timing is called “voluntary suspension.” Voluntary suspension allows you to turn on your benefit as early as 62 and choose to suspend your benefit later. As you collect the benefit, you have to pay the early withdrawal penalty, with up to a 30% discount versus what you’ll get at your full retirement age. That can be a lot of money left on the table. If you then choose to do a voluntary suspension and allow your benefit to grow with deferred credits of up to 8% a year plus any cost of living adjustments, until you reach the age of 70. This strategy allows you to take money out of the system upfront and then accumulate credits back in the system while you’re deferring your benefit. This can be an especially powerful strategy for married couples, who can strategically time their benefits together. 

Getting the Most Out of Your Retirement with REAP Financial

As with everything, voluntary suspension is not the correct strategy for everyone. It will depend on your situation and the many other factors we’ve discussed. To learn more about Social Security benefits and maximizing your retirement funds, make sure you check out our website and extensive YouTube channel for all the best tips and tricks!

Retirement & Financial Planning in Austin, Texas

If you’re in the Austin, Texas area and looking for a skilled retirement planner, consider connecting with our expert team at REAP Financial. We excel in creating customized retirement strategies designed to meet your specific financial goals and lifestyle dreams. Let us guide you through the complexities of retirement and financial planning to secure a prosperous future for you and your family. Contact us today for a consultation and begin your journey toward a peaceful retirement in Austin.

Phone: (512) 249-7300

Our Main Office Address

REAP Financial

9414 Anderson Mill Rd #100

Austin, TX 78729


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