Social Security Planning: A Necessary Step to Retirement

When you are getting ready to retire, you have to make sure your money is set. Not only should you plan for unexpected costs, such as medical bills, but you should also look at what funds you expect to receive from the government. Social security planning should be part of your pre-retirement considerations.

Most people plan to retire when they are 62 years old. While that may seem like the best time to start enjoying your post-work life, it may not actually be the best time to start drawing from the government. The average pay-out at 62 is $17,200 a year, below a living wage. However, if you wait until age 67 you could get 43 percent more with annual benefits of $24,600. Those who can wait until age 70 to start drawing can earn as much as $30,500, a 77 percent increase over what they would have received at age 62.

By drawing at the earlier age, you actually limit yourself to that earning potential. This can make it impossible for married couples to boost their lifetime benefits, which could have been achieved by waiting just a few years. On the flipside, by waiting you could end up leaving money with the government if you die unexpectedly. When you are trying to determine the best retirement age, you need to consider your current health situation before applying or delaying application for your benefits.

Calculators Can Help Measure

There are calculators out there that will help you determine the best age for you to retire and assist with your social security planning. Most of these tools are geared to take your income into account and determine at what age you will receive the most money, regardless of marital status.

However, there is also a newer calculator out that takes into account marital status. More frequently, this calculation shows that the younger, lower-earning spouse should take retirement earlier. An older, higher-earning spouse, however, should wait until age 70 when benefits are maxed out.

Use Other Means to Make Ends Meet for a While

You do not have to stay working in order to max out the benefits. Instead of drawing from the government the minute you retire, you can use savings, 401(k) or IRAs to live. By extending the time before you apply for benefits you will greatly increase your income.

For most people, social security planning is an important step that is overlooked in the overall scheme of prepping for retirement. For over half of non-married recipients, government money can account for at least 80 percent of income. Married couples fair better, because there are two sources of retirement, but a third still rely on the stipend for at least 80 percent of their benefits. It is therefore imperative to know how much you will be able to receive.

It pays to do some research and find out what is the best age to begin withdrawing during your social security planning sessions. Careful planning can save you or your spouse from financial distress as you age.

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