To many, when to claim Social Security benefits is an enigma. At CCMI we help our clients to understand their Social Security options by utilizing an industry leading tool called Social Security Analyzer. We aim to help our clients make the most informed decision possible. Choosing the right strategy has the potential for greater lifetime income if you live to the average life expectancy (as defined by the Social Security Administration). With this much at stake and the complexity of the Social Security system, we encourage our clients to let us guide them when making this decision.
Social Security Analyzer recently sent out an email called the “5 Common Social Security Myths” which explains a few misconceptions about Social Security. We have adapted the myths from the email for clients below:
MYTH #1: SOCIAL SECURITY WON’T BE THERE FOR ME WHEN I RETIRE.
Sure, there are funding problems for Social Security. But the system can and will likely be fixed before reductions are required to your monthly Social Security checks. No politician wants to run for office after having cut someone’s Social Security benefits. Too many Americans rely on Social Security to fund a substantial portion of their retirement. While the payout rules might change over time, and it’s possible younger generations might see lower checks, there will still be Social Security benefits of some kind far into the future.
MYTH #2: THE SOCIAL SECURITY ADMINISTRATION WILL GIVE ME ADVICE ABOUT WHEN TO CLAIM MY BENEFITS.
While agents at the Social Security Administration can answer technical questions and help you with the application process, most people don’t realize that the agents are prohibited by policy from actually giving advice about when to claim benefits.
MYTH #3: I SHOULD CLAIM BENEFITS AS SOON AS POSSIBLE SO I’ll GET MORE CHECKS AND MORE MONEY OVERALL.
Social Security Analyzer did the math for you, and this myth is simply not true if you live to a normal life expectancy (as defined by the Social Security Administration). Sure, you’ll receive more checks if you claim your benefits early, but waiting to claim means substantially larger checks each month – and a lot more in cumulative lifetime benefits if you live a long life.
MYTH #4: I SHOULD CLAIM BENEFITS EARLY AND INVEST THE MONEY.
There have been times in history when this might have made sense, but not in a low interest rate environment. According to most analysts, it would take a return on the investment of at least 8% – net of fees – for claiming early and investing the money to make sense. And that would have to be a consistent return on the money year over year.
MYTH #5: I SHOULD CLAIM BENEFITS EARLY BECAUSE I MIGHT NOT LIVE LONG ENOUGH TO BREAK EVEN.
If you are married, life expectancy tables indicate there’s about a 3% chance that neither you nor your spouse will live beyond age 73. But there is a 76% chance that at least one of you will still be alive at age 83. Would you make a choice that has a probability to work out best 3% of the time or 76% of the time? Claiming early not only reduces cumulative lifetime payouts if you live a long life, but it also reduces the survivor benefit that can be available to your spouse.
If Social Security is a concern for you, a friend or a colleague, please contact CCMI to see if we can help navigate the complicated options that may be available using these industry leading tools.
CCMI provides personalized fee-only financial planning and investment management services to business owners, professionals, individuals and families in San Diego and throughout the country. CCMI has a team of CERTIFIED FINANCIAL PLANNERTM professionals who act as fiduciaries, which means our clients’ interests always come first.
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