An acquaintance of mine recently informed me that her husband was retiring. Considering that she is only 40, I found this pretty surprising. Apparently, this gentleman is blessed with the same magic that I am and was able to entice a lovely young woman two decades his junior to fall in love with him. My wife Marea certainly looks like a 40 year old woman but I think she may be as old as 42 3/4.
Isn’t life great!
So since he is turning 62, we went on to discuss…what else? Social Security!
Many may be thinking: What’s to discuss? Turn 62 and sign up.
As some of you may know, my colleagues have spent a significant amount of time during the past year analyzing the intricacies of Social Security. After producing an array of training material for financial advisors, the team uncovered some pretty amazing facts.
Perhaps the most surprising is that there are over 2000 possible claiming strategies available depending on individual circumstances. Of course, there isn’t enough room to even scratch the surface here, but suffice it to say that not everybody falls into the category of automatic sign-up on your 62nd birthday. Understanding variables like marriage status, spousal income, and full retirement age (known as FRA) is necessary before making one of the most important decisions of retirement, as an incorrect choice could literally result in a potential loss of a $100,000 or much more at a time when you may need it the most
For example, a 60 year old male reading this update with a life expectancy of 86 can expect to earn $734,000 or more if he files for benefits at age 62. If he waits until his full retirement age of 66, he will earn over $850,000. Assuming he waits until age 70, Social Security income may likely exceed $945,000. Note that a key consideration is always spousal survival benefits which may significantly impact the quality of life of the surviving spouse.
Back to my dear friend.
Her husband’s decision when to collect Social Security is impacted by two very unique variables: his very young children. She works full time and makes decent money. He spends most of his time managing household affairs from a relaxing position on the couch. The question is, should he claim at 62 and receive the minimum so he can help with the household bills? Or would it be better to wait until 70 and use the maximum to tackle college? Who knows, he may want to go back to school as well.
It turns out that Social Security does provide special compensation to retirees with small children, and every child may receive up to one-half of the parent’s full retirement or disability benefit. So in his case, the decision to wait is offset by the extra funds he will receive for his kids. Ultimately, every family situation is unique, so if you want to ensure that you are optimizing your Social Security benefits, it is best to contact an expert.
Because most of America is on some sort of vacation this upcoming week, July 4th fireworks are typically reserved for the Esplanade and not the markets, so it advisable to remain focused on the long-term, enjoy some backyard barbecue, and dodge afternoon raindrops.
Have a productive week and great holiday.
Ron Mastrogiovanni and Chris Leone
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