There is often-ignored asset potentially worth 1 million dollars that many of us have or will have access to, but we may give little thought to planning for this asset only to realize a minimal portion.
Roughly 74% of the time this asset is cut to a minimum because we did not do any research or planning, and once you implement your hasty plan, it is often times too late to change. It is an asset that on average accounts for 70% of our retirement income.
This asset is Social Security. Yes, I know that you have probably read articles related to Social Security, I have published a few myself, but the reality is that everyone 55 old and up should start to plan for their retirement as it relates to their SS benefits. There are a whole bunch of us out there that will be retiring in the next 15 years.
The facts are is that SS will supply you with data and facts, but they will not render advice or methods of filing that could impact your benefits substantially. When speaking with people about SS, I often hear a lot of misconception surrounding the process for spousal, divorced and widowed people. For married couples there are some methods of filing that are very beneficial to both parties, but not used that often because of the lack of planning with a knowledgeable SS and retirement planner. With many of us living longer and working longer, it typically doesn’t make sense to take early SS benefits. There are times when taking early SS is the best option, it just seems that it would not be 74% of the time. Currently you have one year from the time you take your first benefit payment to reverse and pay back what you have been paid. You can only do this once, so do some planning before you take that step. There are also limits on income with early SS that once surpassed will reduce or tax your benefit substantially. If you asked most people why they started their SS benefits early, they would tell you that they needed the money, or they thought that if they didn’t get in now there may not be anything for them if they wait.
If we moved the ‘full retirement age’ ahead to 70 years old and “tightened up” the rules for collecting SS benefits, we could solve a lot of problems around insolvency.
Social security benefits and strategies, even though simpler than before, still are somewhat confusing and complicated. Do you know what FRA means? Or PIA? How about “bend points”? I encourage anyone that is approaching their social Security benefit election period to call our office and speak to an advisor regarding Social Security and Medicare options.
When to take your SS is a major part of most people’s retirement income plan, so do not take your benefit prematurely.
We should all attempt to stay healthy, productive and plan for our upcoming retirement, whenever that is.
Mark Patterson is Chief investment officer with MHP Asset Management and can be reached at (603) 447-1979 or mark@mhp-asset.com.
