When Should You File for Social Security? - Adviser Investments

When Should You File for Social Security?

October 19, 2018

Episode Description
Interview With Dina Milne and Alec Rosen

Fewer people are retiring with pensions, making Social Security benefits an even more important piece of the retirement planning process. In the first of a three-part series, two of our wealth planning professionals discuss the basics of Social Security and what to consider before deciding when to start taking benefits.

Episode Transcript

Dina Milne: Hello. I’m Dina Milne with another Adviser You Can Talk To podcast. I work with clients in a relationship capacity and I’m here with Alec Rosen. Alec is a Senior Account Manager who’s earned his CFP designation and is our resident Social Security expert. We’re very excited to bring you a three-part podcast series all about Social Security. Today, we thought we’d start with the basics. Alec, what is social security?

Alec Rosen: Yeah. Hi, Dina. What a great topic. Our Social Security system has been around for over 80 years, and over 61 million folks today enjoy some benefit from Social Security. In fact, for many of those people it makes up the majority of their income. For the purposes of this conversation, Social Security was established back in the day to provide the American people not only with retirement benefits but also disability and survivor benefits. Just about everyone in the United States pays taxes into Social Security.

Dina Milne: Right. That’s what you notice on your paycheck, FICA, which is the Federal Insurance Contributions Act, and they always take a percentage off your paycheck each period.

Alec Rosen: That’s right. That’s the big joke around here is, “Where does that money go?” Well, the answer is Social Security, right? We hear a lot in the news about Social Security what feels like weekly, both good news and bad. But I think what I’d want our listeners to know is that that money is there to help ensure that money is available during retirement years, and if there is a disability.

Dina Milne: That’s right, Alec. When I work with clients regarding their income in retirement, we like to think of it as a three-legged stool. So retirement income used to be pension income, Social Security income and savings. That picture has changed a little bit. Pensions don’t really exist anymore. Now it’s more of a two-legged stool, let’s say, which is Social Security income and savings.

Alec Rosen: Right.

Dina Milne: So there’s a bigger reliance on Social Security.

Alec Rosen: Right.

Dina Milne: Alec, what should our listeners know about Social Security?

Alec Rosen: We could spend hours talking about Social Security and all of the ins and outs. But I think I’d like to boil it down to three important bullets for our conversation today. The first bullet is making sure that you qualify for your benefits. Not only do you have to pay the Social Security taxes that we mentioned before, you also must have 10 years of working history in order to be eligible for benefits. If you make your way to Social Security’s website, SSA.gov, you can get a lot of that information, including your eligibility, your current or potential benefit. The website’s spectacular. I recommend it, if you haven’t been there already.

Dina Milne: Yeah. In the past, they used to actually send out a letter. The Social Security Administration would send out a letter advising people what their benefit’s going to be at retirement and so forth. They don’t really do that anymore. They send that letter when you get closer to retirement, but it’s always good to keep track of what your benefit looks like, because of course it’s changing each year. Funny enough, I just got an email from them today, prompting me to log in and check my benefit. I think it’s a great site. I recommend that everybody set up an account with them.

Alec Rosen: How serendipitous. The second bullet is getting the most out of your benefit or your spouse’s benefit. Age really matters here. The general rule of thumb is to wait to take the benefit as long as you can. There’s a lot of complicated math that goes into the back-end of this, but put simply: You can begin to take your benefits starting at age 62, when you are first eligible. If you do this, there’s a reduction in the amount of benefit you will receive for the rest of your life.

Your full benefit amount comes around age 66 or later, depending on when you were born. That’s the full amount that you can receive and are eligible for from the taxes that you’ve paid in. The last option is to wait until age 70. By waiting, you can get an accelerated benefit, which will be significantly more, in some cases, than not only the first eligible amount at 62, but also your full benefit amount at your full retirement age.

Alec Rosen: Please note that almost three-quarters of Americans do file early, and usually that isn’t the best option, although we’ve had some circumstances with our clients where that can make sense.

Dina Milne: Yeah. I think it’s hammered into us that, “Defer, defer, defer.” But of course, there are certain situations where you should take it early. For example, if you’re in poor health, life expectancy might be reduced, the benefit is there, you may as well take it. A second situation is, if you really need the money, there’s no other source of income, you’ve contributed to it. Take it, take it early.

A third situation is, some people will work in retirement and they’ll earn a little bit of income, but it’s not enough. You need to supplement that income. Take the Social Security early at that point. Finally, a common strategy that a lot of spouses use is one of them would take it early and the other one defers. Usually, it’s the person with the smaller benefit takes their first, and the other space will wait until they are 70 and take it, take a bigger benefit at that time.

Alec Rosen: Right, right. I think, given all that, my last bullet point here is: Get help. This can be really complicated, and not every situation’s the same. There’s so many nuances that it can only be to your benefit to speak with an expert. Unfortunately, we found, many of our clients look to the Social Security Administration for advice, and they aren’t great at giving advice. Right?

Dina Milne: No, they’re not. They’re very good at taking care of the administrative side of it, making changes, setting you up for your benefit, but no. They are not good at giving advice. You’re better off speaking to your adviser and doing a little bit of planning around it.

Alec Rosen: Right. We’d love to help and we certainly can. Dina, what else is important for folks to know? What happens if, perhaps, they did file early and they realize now that that wasn’t the right move? Can they do anything?

Dina Milne: Yes. There’s a do-over strategy. You can do it within the first 12 months of filing, and it would basically be, you take back your application, you defer the benefit. You do have to pay back what you have received, and then you can file for it when you’re ready. For example, if you won the lottery, some money came your way, you decided you didn’t like retirement, you wanted to go back to work, you can definitely do it all over.

Alec Rosen: That’s good to know. I don’t think a lot of people know that.

Dina Milne: No.

Alec Rosen: Alright!

Dina Milne: Let’s recap. We talked about the basics of Social Security, what it is and why it’s important. We talked about the important ages, and where you can go and shouldn’t go advice. In our next series, we’re going to dive a bit deeper into the specific circumstances and ensuring that you’re getting your highest benefit. Alec, do you have anything to add for our listeners?

Alec Rosen: I’d like add a plug here at the end. We take a lot of pride in the retirement and financial planning work we do with our clients. A big part of that is Social Security. We’d love to prove we are an adviser you can talk to, so please don’t hesitate to call if you have questions or you feel we can help.

Dina Milne: Thanks, Alec and thanks everyone for listening. This has been Dina Milne and Alec Rosen from Adviser Investments. We’re thanking you for listening to another Adviser You Can Talk To podcast.

If you’ve enjoyed this conversation, please subscribe and review our show. You can also check us out at AdviserInvestments.com/podcasts. We’d love your feedback and to hear back from you. If you have any topics that you’d like us to explore, please send us an email at info@AdviserInvestments.com. Thank you.

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[The Social Security Administration] is very good at taking care of the administrative side, making changes, setting you up for your benefits, but they are not good at giving advice.


Dina Milne

Account Executive

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