Claim Now or Wait? The Numbers on Social Security Cuts

Описание: Should you start Social Security benefits early because the Trust Fund is running out of money? What’s the best claiming strategy if you think Social Security will cut retirement benefits?

We can run some numbers to estimate the impact of claiming early. You’ll get a reduced benefit for claiming at 62, but you’ll get a full payment for a number of years before 2033, when the system might change. So, do you come out ahead if you were otherwise going to delay claiming?

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A free online tool for figuring this out is OpenSocialSecurity from Mike Piper. That tool allows you to enter your information and specify some critical factors. Specifically, you can change your life expectancy, and you can ask the tool to assume that your benefit will be reduced in a future year.

It might seem intuitive that you should take the money and run: If there will be cuts, get out ahead of them. That might or might not be the best strategy—only time will tell. When I look at the numbers, I don’t see a significant benefit to changing your strategy using some basic assumptions. If you were going to delay previously, it might still make sense to delay.

That’s not to say you shouldn’t claim early. There are a variety of reasons to claim at 62, including a short life expectancy, need for cash flow, unlocking benefits for other family members, and more. But again, if your primary concern is insolvency, take a look at the numbers.

We’ll also glance at some numbers from Income Lab, which is a financial planning tool using risk-based guardrails. That tool includes nice illustrations and a quick view of the breakeven age using different assumptions.

Finally, there's a demonstration of how a discount rate, or the time value of money, can affect the Social Security timing decision. With a discount rate applied (and with a higher rate), calculators typically suggest claiming earlier than otherwise.

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Justin Pritchard, CFP® is a fee-only fiduciary advisor who can work with clients in Colorado and most other states.

IMPORTANT:
Always verify details with the Social Security Administration before making decisions. It's impossible to cover everything you need to know in a video like this. The only thing that's certain is that you need more information than this. Always consult with a CPA before making decisions or filing a tax return. This is general information and entertainment, and is not created with any knowledge of your circumstances. As a result, you need to speak with your own tax, legal, and financial professional who is familiar with your details. This video is not a substitute for individualized, personal advice. Please verify with your plan administrator when employer plans are involved. This information may have errors or omissions, may be outdated, or may not be applicable to your situation. Investments are not bank guaranteed and may lose money. Opinions expressed are as of the date of the recording and are subject to change. “Likes” should not be considered a positive reflection of the investment advisory services offered by Approach Financial, Inc. The Comments section contains opinions that are not the opinions of Approach Financial, Inc., and you should view all comments with skepticism. Approach Financial, Inc. is registered as an investment adviser in the state of Colorado and is licensed to do business in any state where registered or otherwise exempt from registration.