One of the first questions my clients ask is “When should I start collecting my Social Security?” This can be a complicated and almost paralyzing topic. As an agent that helps people with retirement planning and Medicare, I wanted to share with you some of the lessons that I have learned and give you some tips.
1. Create A Social Security Account Online
This may sound like a simple tip, but it is often overlooked. The Social Security Administration stopped mailing statements back in 2011. There are some exceptions, but for the most part, they do not mail them out. Sign up for an account and make sure your earnings are correct.
Pro Tip: Know your earning amount at age 62 and at your full retirement age. It’s important to understand the payment structure.
2. Create A Retirement Budget
If you’ve spent your career working within a budget, this will not be difficult for you. You will want to factor in travel, hobbies, and any additional funds you are now ready to use. Of course, your budget should begin with your bills and any debt you may have incurred. Whatever is left can be used for fun. If you’ve never created a budget, here is a good place to start:
- Put your income, that you make or collect, on a piece of paper at the top.
- List all of your financial obligations such as rent, mortgage, utilities, cell phone, cable, internet, credit card and car payments, health and life insurance, subscriptions, etc.
- Separate your food, gas, gift allowance, restaurant dining, pet care, and any extra monthly expenses.
- Finally, subtract the amount of your obligations from the amount of money you make each month.
The hardest part in all of this is just doing it. You need to live within your means and see where you can cut costs. Some couples I know sold one car and shared the other. It actually worked out very well and saved them a good chunk of money. Your goal is to have money left over to enjoy what you want to do.
Pro Tip: Practice living within your budget for a month. Can you do it? What could be cut back? Where can you spend more? Then you can adjust accordingly.
3. Start Plugging In The Numbers
This may seem tedious and most of us would rather just ignore it, but it is crucial to know how much money you have in what accounts. This is also important for your children to understand, in case they need to step in and help. I’ll give you a sample rundown of where to start.
- Start with your Social Security withdrawals at age 62.
- Include any pensions you may have.
- Look at other sources of income, such as a 401k, IRAs, or additional investments.
- Ask yourself if the money for your lifestyle is what you want, or do you need to change your lifestyle, earn money, or possibly pay off debt.
- Then, use the same numbers, but plug in your Social Security at full retirement age.
Did that make all the difference? If so, then you have the start of a retirement plan.
4. Important Questions To Ask About Your Spouse Or Former Spouse
I have a few questions I ask about marriage and divorce. These are good places to start when diving into when to collect your Social Security. The answers might surprise you.
- Were you married at least 10 years to a former spouse?
- Do you have their Social Security number? If not, can you get it?
- Did you know that you can claim some of their Social Security? It might be less than yours, but it doesn’t hurt to call or go online to see what the amount would be. You will need their Social Security number to find out.
If you were married for 10 years or more, then you have a claim on a spouse or former spouse’s Social Security. It might be less than your current payment, but it could also be even more.
5. Taxes
Like just about everything else, Social Security can be taxed. A financial planner can help you discern which sources of savings are taxable and which ones are not, once they are withdrawn. The formula used to determine your Social Security taxes is called the provisional income formula.
6. Who To Call
The Social Security Administration encourages you to call the main toll-free number. But in my experience, calling your local office is a way to get better service and quicker responses. You can put in your zip code here to find the office closest to you.
The most important piece of advice I can offer is to start this process early. The government does not turn on a dime. Look at all your sources of income and see if you can defer Social Security. Finally, talk to a person that works in guaranteed income.
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