by Kathy Sablone, JD, AEP®, Director of Wealth Planning
by Check Your Earnings Record for Accuracy
Social Security no longer mails annual benefit statements until after you reach age 60. The easiest way to check your earnings record is to create an online account at www.ssa.gov. It is important to review your record and correct any inaccurate information because it will affect your benefit amount. Although you are eligible for Social Security after 10 years of earnings (40 quarters), your benefit is based on your 35 highest years of earnings. If you have less than 35 years of eligible earnings, the missing years will be counted as a zero and lower your benefit.
Delayed Benefits Increase at a Guaranteed 8% Per Year
It can be difficult to generate an 8% rate of return and rare for that rate to be guaranteed. Yet, if your full retirement age is 66 and you wait until age 70 to collect, then you will actually receive an amount that is 132% of your base benefit (known as your primary insurance amount, or PIA). On the other hand, if you rush to collect at age 62, you will only receive 75% of your PIA. Delaying benefits also has a compounding effect because the benefit amount is adjusted for inflation each year. If you have other sources of income and are in good health, it may be in your best interest to delay receiving Social Security as long as possible.
Divorced Spouse Benefit
If you are divorced, you may be eligible for benefits based on your ex-spouse’s record. As long as you were married for at least ten years and have not remarried, you are entitled to a spousal benefit. It does not matter if your ex-spouse has remarried, and you do not need to notify him or her that you are filing. The Social Security Administration can look up your ex-spouse’s information and let you know if the divorced spouse benefit is higher than you would receive on your own record. This rule is especially helpful for a divorced spouse who did not work during the marriage and did not earn many credits on his or her own record. You should note that Social Security Administration will not know to look for an ex-spouse unless you tell them.
Survivor Benefits
If you are married, delaying your benefit will also increase the survivor benefit for your spouse. The surviving spouse is entitled to 100% of the benefit that the deceased spouse was receiving, as long as the surviving spouse has reached full retirement age. The survivor benefit can be especially valuable when the lower-earning spouse is significantly younger. Before you decide to file early, you should consider your spouse’s life expectancy and how a lower benefit will affect his or her long-term financial security.
Social Security Does Not Recognize Power of Attorney
As part of your estate plan, you should have executed a Power of Attorney to designate an agent to act on your behalf in financial matters in the event you are incapacitated. It may surprise you to learn that Social Security will not honor this legal form. Instead, an individual who is receiving benefits or applying for benefits may name up to three individuals as Advance Designees. If you become unable to manage your benefits in the future, Social Security will work with your designee.
Conclusion
At Boston Financial Management we can help you navigate all aspects of your financial road-map, including Social Security income. We can help you review your options and compare the potential income stream for various claiming strategies. If you have any questions about Social Security, please contact your wealth manager.
IRS Circular 230 Disclosure: Pursuant to IRS Regulations, we inform you that any tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding tax related penalties or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.