Social Security and your retirement income
If you’re like many Americans, Social Security will likely be a key component of your overall retirement income strategy. Choosing when to start Social Security is an important decision as it will impact your income throughout retirement—and it can also affect the income and lifestyle of a surviving spouse. As you consider your Social Security options, it’s important to seek the help of a financial professional. A financial professional can help you review your overall financial situation and develop a comprehensive strategy to help coordinate and integrate your Social Security benefits with other sources of retirement income.
Increasing your Social Security income by delaying your benefits
You can increase your Social Security income through a delayed claiming strategy. What is “delayed claiming”? Rather than starting Social Security early at 62 or at your Full Retirement Age (which ranges from 66 to 67 based on your year of birth), you may want to consider a delay strategy where you start taking benefits after your Full Retirement Age. Due to the fact that those who start Social Security later won’t have as many expected years of benefit payments, Social Security provides retirees with a higher income each year they wait past Full Retirement Age. Delaying your benefits beyond your Full Retirement Age will increase your benefit by 8% every year1 through delayed retirement credits. Credits are available each year past Full Retirement Age that you wait to start collecting until age 70; credits are pro-rated for partial years.
Here’s an example that shows how monthly benefit amounts can differ based on the age you start collecting benefits.2 This example assumes a benefit of $1,000 is available at Full Retirement Age (FRA) of 67. Your Full Retirement Age may differ based on your year of birth.
Chart that illustrates that if you start collecting early—prior to your Full Retirement Age and you were born in 1960 or later, benefits will be reduced by up to 30%. The percentage reduction varies depending on your year of birth and Full Retirement Age. The reduction is 5/9 of one percent for each month before your Full Retirement Age, up to 36 months. If the number of months exceeds 36, then the benefit is reduced 5/12 of one percent per month in excess of 36. If you wait and start collecting after Full Retirement Age and you were born in 1960 or later, benefits will be increased by up to 24%. If you were born in 1943 or later, the delayed retirement credit is 8% each year.
Creating a Social Security delay bridge
If you do decide to retire but you choose to wait past your Full Retirement Age to start collecting your Social Security benefits, you may need another source of guaranteed income to help meet your retirement expenses until you start Social Security. That’s where an annuity can help. With an annuity, you can build a base of protected lifetime income to help cover fixed expenses, such as a mortgage, utilities and groceries, during this bridge period while you wait to start collecting Social Security.
Once you eventually start collecting Social Security and the higher income from Social Security begins, it can be combined with protected lifetime income from the annuity to help meet your retirement expenses for as long as you live.
Having higher Social Security benefits5 and protected lifetime income from an annuity in retirement can help enhance retirement security and reduce worries about retirement spending.
Take action for your financial future
To learn more about coordinating your Social Security benefits with lifetime income from annuities, talk to your financial professional today. Your financial professional can help you develop a retirement income strategy that makes sense for you.
1Assumes an individual is born in 1943 or later.
2Amounts shown do not reflect any cost-of-living adjustments.
3Percentage reduction varies depending on your year of birth and Full Retirement Age. The reduction is 5/9 of one percent for each month before your Full Retirement Age, up to 36 months. If the number of months exceeds 36, then the benefit is reduced 5/12 of one percent per month in excess of 36.
4If you were born in 1943 or later, the delayed retirement credit is 8% each year.
5Social Security benefits are inflation-adjusted and government backed.