10 Tips to Maximize Social Security Benefits for Clients
There is a lot of misinformation and misconceptions about Social Security. But it’s a major government program and anyone over the age of 40, at least, will be dealing with it at some point in their lives. And with a few relatively minor changes, the program could last for generations. So if you don’t know enough about it, now is the time to brush up to help your clients.
<b>Dont panic over reports that Social Security is going bankrupt</b>
Example: Eliminating the cap on income subject to the FICA tax.
<b>Social Security has a death benefit</b>
widows benefitthat is 100% of the deceased spouses Social Security benefit. Thats a good reason for the higher earning spouse to wait until age 70 to start collecting benefits. Where else can you get an annuity like that with an inflation clause linked (so far at least), one-to-one to the Consumer Price Index?
This amount will be reduced by a small amount for each month before the widowed spouses actual retirement age of 62, but after age 62, the widow may switch to his or her own account.
<b>Maximizing your earnings just before retirement can pay off big in higher Social Security benefits</b>
Children and surviving parents get benefits from a deceased spouses Social Security
<b>If you started collecting early, and now think that was a mistake, you can fix it</b>
<b>You dont need to retire to collect Social Security, even at age 62, but you will pay a penalty</b>
But dont be too troubled by the penalty. The Social Security Administration, after you reach full retirement age, will adjust upward your benefit amount to reflect the extra money you earned by continuing to work while collecting early benefits, and the money that was withheld as a penalty.
<b>Social Security income and the law</b>
This means you may want to settle federal debts using other assets before you are depending upon your Social Security benefits in retirement, but it also suggests that if you have transferred other assets, for example into a Trust for your children, you dont have to worry about private creditors.
<b>Social Security income is taxed at less than other income</b>
However, since withdrawals from a Roth IRA dont count as taxable income, it can be advantageous to start withdrawals from non-Roth retirement funds, holding Roth withdrawals until you start collecting benefits.
<b>Dont rely on estimates</b>
<b>Marriage and Social Security</b>
Read more: Smart Ways to Talk About Retirement & Social Security.
Read more: What Advisors Get Wrong in Retirement Planning.