Ok. If you’ve stuck by us for the first two retirement posts (find them here and here, this one will be a real treat. Today, we tackle when to take social security. This is THE definitive guide for social security retirement for 2018.
- Deciding when to collect socialsecurity
Social security is the primary source of income for people over the age of 62. In fact, 97 percent of people over age 60 do receive or will receive social security. The average social security payment in 2018 is $1,432.00. If this sounds like a pitiful number it is. You simply cant live on this amount of money. Ok, so all of that was bad news. Why even write about social security? Because at Chronicles of Rationality, we are going to maximize your social security benefits. Here’s how in four steps:
1. Wait, wait, wait, and wait some more.
2.Keep working after taking social security (at full retirement age)
3. Use science and life expectancy to determine when to take social security to maximize benefits
4. Supplement social security with income from investments
- Waiting is Good. Most Americans can begin drawing social security at age 62. You will receive the least amount of social security possible, but you can technically receive something at that age. Check out the social security tables to see how much you will make at age 62 vs. how much you will make at age 70. Most likely, you can double your social security by age 70. Since most Americans are living longer than ever, you are probably sacrificing thousands by drawing social security early. Ok, so what are the numbers. In 2018, if the average American takes social security at age 62, that person will receive around $900 a month, If that same person waits until age 70 to draw social security, the payments would be closer to $1,700 a month. Since the person who waits will also continue to work until age 70 (or beyond) that person will end up with literally hundreds of thousands more to retire on. A person who waits until full retirement can also receive full social security benefits and continue to work without losing a single penny of social security payments. If you draw social security early, social security will penalize you for working from that point moving froward.
- Work is good for the mind, soul, and wallet
When I first started working, I worked for a large firm in DFW and one of the founding attorneys still came in five days a week and tackled the most difficult projects our firm took on. He was 93 years old. I am a firm believer in working until you literally cant anymore. Do I mean you have to slave away at a job you hate for decades? NO! Work at a decent job with a decent attitude until you reach a point in your life where your income is less important to your overall success. Maybe your kids are out of college. Maybe you’ve paid off your house. Whatever the reason, quit the rat race and go find yourself a solid job close to your home with people you enjoy.
3. Use Science and Life Expectancy to determine when to file your benefits. Alright, we are starting to get morbid, but this is a necessary step in the process. Go here to check out the official actuarial life expectancy tables. If you have a good family history and fairly decent health, I would definitely recommend waiting until 70 to file. If you are in poor health or have a family history of health issues, you might consider filing early. This goes doubly for those with spouses. If you wait to file and have a younger spouse, you could help them receive thousands more in the future from your own social security. Thinking about your death is never fun, but using math and logic to maximize your social security payments could provide thousands of dollars to your loved ones to supplement retirement.
4. Supplement your social security with retirement funds. We preach savings for retirement on this site. Social security will never be enough to support most people. Since we are alive average, we will need above average income to supplement our lifestyles in retirement. This is where investments come in. You should have an IRA, 401(k), Roth IRA, SEP IRA, etc. If you don’t have any of those accounts, open up an investment account at Vanguard and start saving. Once you stop working (or change careers) you can figure out how long your investments will last and how much you can draw each month before you go broke. You can use an online calculator to determine what your investments will project to be in the future. Use 7% as a go-by for your return. Use 5% for a conservative approach to investment returns. You might also plan on leaving some money for your children or for charity. Planning for retirement and dying with money in the bank is always a good thing. Draft your Estate Planning documents and be prepared when the time comes. Until then, live life to the fullest and as always…
Stay Rational
-B&T