1. Longevity - Let’s face it, we humans are living longer. Medical advances and healthier lifestyles have increased longevity. How much has longevity increased?
- Males have a 50% chance of living to age 85 and 25% chance of living to age 92.
- Females have a 50% chance of living to age 88 and 25% chance of living to age 94.
- With couples there is a 50% chance that at least one partner will live to age 92 and a 25% chance that one partner will live to age 97.
2. How is social security calculated?
- Benefits are based on the best 35 years of your work history and the benefits reflected on your statement reflect the assumption that you will continue to earn your current salary (from the last two years) until you begin to collect benefits.
- To be fully insured, you need 40 credits. A maximum of 4 credits can be earned per year. For 2013, one credit is earned for every $1,160 of wages.
- When you look at your social security statement, you will find three key numbers: your monthly benefits if you collect at age 62, your monthly benefits if you elect to collect at your full retirement age and your monthly benefits if you collect at age 70.
3. What options do you have?
- You have the option to start collecting your benefit anytime between age 62 and age 70. However, if you collect before full retirement age, you will collect a reduced benefit amount. If you wait until full retirement age, you will be eligible for your full benefits (also known as your primary insurance amount). If you wait until after full retirement, you will be eligible for an increased benefit amount.
- Full retirement age is not the same for everyone. For those born 1937 or earlier, it is 65. For those approaching retirement right now, it is right around age 66.
4. What else do you need to factor in?
- Your health and family history. What is the state of your health? What is the expectation of longevity in your family? These factors will significantly contribute to your social security strategy
- Are you fully retired or are you working? Even if you work part time, it may affect your benefit amount.
- Are you single or married? What is the age difference between you and your spouse? Answers to these questions will lead to different options when collecting your benefit amount.
5. Collecting early versus collecting later.
- 74% of people collecting Social Security benefits today are collecting reduced amounts because they collected as early as age 62. Why, in the face of longevity do so many people collect benefits when they hit age 62? Probably because they can. Even though so many people are concerned with longevity, they are willing to except reduced benefits for life to avoid not getting their fair share of benefits because they may die early.
- However, longevity is a reality. In 2010 there were approximately 1.8 million people over the age of 90 collecting Social Security benefits. There were over 51,000 people over the age of 100 collecting benefits.
- So what happens if you wait to collect benefits? You will be awarded guaranteed increases in your benefits of 8% (assuming you were born in 1943 or later)per year beyond full retirement age up until age 70. For someone with a full retirement age of 66, this could be an increase of 32% by age 70.
The bottom line is that although a majority of people collect Social Security benefits the moment they turn 62, there are many different options available to you. Everyone’s situation is different and a strategy that works for person A may not work for person B. A financial advisor with knowledge of Social Security can help you form the strategy that works best for you. The difference between collecting early and coming up with the best possible strategy for you can add up to large sums of money over the course of your retirement.
Gerber Kawasaki Wealth Management
2716 Ocean Park Blvd #2020
Santa Monica, CA 90405
Securities offered through LPL Financial, member FINRA/SIPC. Investment advisory services and fixed insurance offered through Gerber Kawasaki, Inc., a registered investment advisor and separate entity from LPL Financial.
This material contains forward looking statements and projections. There are no guarantees that these results will be achieved. Investing involves risk including potential loss of principal.