Too often I think that people commonly associate taking Social Security with being in a full-on retirement situation. While the two are related, they don't necessarily have to correlate. As Tim Kober, a certified financial planner for Cedar Financial Advisors in Beaverton, Ore. noted in a recent MSN Money article regarding the ideal retirement age, ""I think people tend to associate when they begin taking Social Security with when they retire, and I think it's really important to decouple those two events,"."
Personally, I look at the two events as separate but linked. And while I plan to work later in life, this doesn't necessarily mean that I won't be taking Social Security at the same time.
Forecasting a Timeline
One of the main activities in deciding exactly when to take Social Security may involve developing a timeline. By considering variables such as length of time to go until hitting retirement benefit age, longevity and health history, financial goals, current financial situation, other sources of income in retirement, and whether work income with continue to some degree in retirement, a more accurate timeline can be developed.
For those of us who still have 20 or 30 years to go until we hit retirement age, this activity can be more difficult, but not impossible. For us long-term planners, we also have to consider the health of the Social Security system itself. Noting that by 2033 the trust fund may only be paying partial benefits means that we may not be getting as much in benefits as we think we might, which could affect when we start taking benefits.
Taking benefits when benefits are available
The older I get, the more I want to take benefits as soon as they become available. Sadly, I have little faith that waiting longer will do me much good, as already it's about the time that I hit the eligibility age for benefits that the system is slated to begin paying out partial benefits.
I have little desire to leave benefits on the table when I die, so claiming my available options for as long a timeframe as possible could help make up for the reduced payment amounts that that result from an earlier start date. In my mind, and with some of the calculations I've done, 25 years of lowered payments are just about as good as 15 years of higher payments. And taking benefits earlier could help me better preserve other assets, hopefully allowing me to leave more of them behind to my descendants when I pass.
Pairing benefits with reduced income
I'm not looking to continue working as I am now or pay more in taxes as I age. Therefore, while I might not retire per se once I start receiving benefits, I might reduce the amount that I work. In this way, while I won't officially be retired, I'll still be earning income, but not so much that I might have to pay a higher rate of taxes due to my Social Security income.
According to the Social Security website, currently as a married individual, earnings up to $32,000 would leave my benefits untaxed. While this amount will surely change over the years before I start taking benefits, it's a good place to start to ensure that I'm maximizing my earnings both in work income and Social Security benefits.
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The author is not a licensed financial professional. The information provided in this article is for informational purposes only and does not constitute advice of any kind. Any action taken by the reader due to the information provided in this article is solely at the reader's discretion.
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