Social Security payouts can help provide a healthy source of income during retirement. How and when you take them out, however, depends on your personal situation.
If you are wondering about utilizing Social Security benefits during retirement, follow this guide for the recommended Social Security strategies to employ.
Leading Social Security Strategies For Your Retirement
Data from the Social Security Administration (SSA) in 2015 states that more than 59 million people are currently receiving benefits. The SSA envisions Social Security as 40% of a worker’s income. This fact must have escaped the participants of a recent survey, where 36% of soon-to-be retirees said they planned for Social Security to be their main source of retirement income.
The average monthly payout per beneficiary is $1,219.04. If that is enough for you, then Social Security will work for you. But many would agree that living on Social Security alone is not enough, especially if you want to have a comfortable standard of living that allows you to branch out a little, and will not require picking up another job.
The prospect of Social Security continuing at full capacity is dwindling. The SSA’s own calculations state that under current conditions, funds for payouts may become fully depleted by 2033. However, beneficiaries would see a reduction in benefits—not a cancellation of them.
What does Miramontes Capital recommend? Do not discount Social Security; it likely is not going anywhere for many decades. But recognize that the types of benefits you’ll be getting are just that: a benefit. That’s why they do not call it Social Security livelihood.
Social Security Strategies: You Have Options
For the amount of possible choices you have with Social Security, it is incredible how little information people have when making decisions, such as when to start collecting benefits. Other possibilities, such as deferring benefits, spousal benefits, and survivor benefits, can add a further need for informed decision making.
When can I start collecting?
The age at which you can receive full benefits is currently 67 years. The earliest you can start collecting is age 62. At this point, you would see a 30% reduction in your payouts. Each year you wait, your payouts are reduced by a smaller and smaller percentage. The same is true for collecting your spouse’s benefits. Age 62 is the earliest you can collect, but you would receive only 32.5% of your spouse’s payouts. If you wait until 67 to collect on your spouse’s benefits, you would receive the maximum possible amount of 50%.
When should I start collecting?
Choosing the top Social Security strategies for retirement is an important decision. Here at Miramontes Capital, we would suggest focusing less about maximizing returns and more about maximizing the usefulness of those returns.
Many clients opt to begin receiving benefits earlier to supplement their income. Likewise, just as many clients have significant amounts of capital on hand, allowing them to wait to take Social Security when the payouts were at their maximum.
There is no one right road to retirement.
One of the factors upon which the decision depends most is your lifestyle. Most people can expect their expenses to increase incrementally for the first 15-20 years of retirement. Then, as they become less active in their 80s, Miramontes Capital clients often see a steady, continual reduction of expenses. Therefore, there may be logic to ensuring that you have the capital to allow for enjoying that first chunk of retirement. Let’s run a scenario comparing the total benefitsif you took out Social Security at age 66 versus age 62.
Imagine your benefits for retiring at the normal age of 66 are $1,900. If you receive your benefits early at the age of 62, the amount will be reduced to $1,400. You would be receiving four years, or 48 months, of benefits from 62 to 66. If we multiply this by $1,400, we get a sum of $67,000 in benefits, money you would not have been receiving if you had waited.
How long will it then take us to get this much money from our payouts that started at the age of 66? The difference between $1,900 and $1,400 is $500. If we divide the $67,000 sum by $500, we get 134 months—about 11.2 years.
Thus, the age at which we will enter profit mode—when we begin to make more than if we had started collecting payments at 62—is 66 + 11.2 = 77.2 years of age. That is when the earnings of the 66-year-old you will actually surpass the earnings of those who opted to start collecting at 62.
Many of our clients take the benefits before their time of maximum payouts. They use the money to travel or wrap up home renovations that they have been putting off. In this way, holding off on collecting may not have as great an effect on your retirement as you may think.
Regardless, the optimal time to start collecting from Social Security depends on your situation. The SSA’s own website says: “As a general rule, early or late retirement will give you about the same total Social Security benefits over your lifetime.” The top factor in your decision-making should be the you side of the equation—when you feel you will most benefit from the payouts.
If you are still wondering about the recommended Social Security strategies for retirement, contact a professional at Miramontes Capital to assist you.
Sid Miramontes and Miramontes Capital have helped more than 1,000 people achieve their retirement goals—and Sid’s new book catalogs that dedication to every single client in the retirement planning process. You can request your copy of the book “Retirement: Your New Beginning” by clicking here.
Schedule an in-office or over the phone consultation to discuss how Miramontes Capital can help you with your new beginning through retirement planning.
Miramontes Capital is a Registered Investment Adviser. Advisory services are only offered to clients or prospective clients where Miramontes Capital and its representatives are properly licensed or exempt from licensure. This website is solely for informational purposes. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may be rendered by Miramontes Capital unless a client service agreement is in place.