How Much Retirement Income Do You Need?
How much retirement income do you really need for your future plans?
Avoid falling for these most commonly heard social security myths.
Given the complexity of the U.S. Social Security system, many Americans are left puzzled when it comes to managing their benefits. Most often, the bulk of people’s confusion is fueled by misinformation and partially-informed opinions. Pair this with the intricate formulas used to calculate benefit earnings, and it’s easy to see where the uncertainty begins. Luckily, the trusted fiduciaries at Royal Oak Financial Group are here to help debunk three common social security myths and guide you in making informed decisions when it comes to your future.
Social security benefits can be modest, so it’s best to know sooner rather than later if other arrangements will be necessary down the road. Having a false understanding of the system puts you at risk for mismanaging your benefits, and not planning enough for the future can cause unnecessary stress in your golden years. Below, we’re clearing the air on some of the most common myths we help clients debunk.
Contrary to what many believe, you don’t have to begin claiming your social security benefits at 62-years-old. In reality, 62 is the earliest anyone is eligible to receive benefits. While you can choose to begin the process after turning 62, it’s important to note that claiming your benefits that early on comes at a cost. Withdrawing at that age results in a 30 percent reduction in monthly income, and many financial advisors will advise you to wait until you hit your full retirement age (FRA) to avoid a loss. Keep in mind that the defined FRA is between 65-67 years old and is dependant on the year you were born. If you were born before 1943, your FRA is 65; 66 if you were born from 1943-1954; and 67 if you were born in 1960 or later.
If you’re willing to wait even longer, the benefits can be more advantageous. Each year you delay, your benefits rise by 8 percent until you hit 70-years-old. However, always remember that the best time to claim benefits is dependant on your unique circumstances. Your marital status, investing abilities, current assets, and even life expectancy all play important roles as well as the time frame in which you’re looking to retire.
Although in select situations ex-spouses may be entitled to the same spousal benefits as if they had remained married, their withdrawal will not have any bearing on the benefits their once-partner and their family receives. For example, an ex-spouse can collect on your benefits if they meet all of the following criteria:
If your ex-spouse meets the above criteria, they’re eligible to claim the higher of the two options: their own benefits or half of yours. However, rest assured that whichever benefits they choose to collect will not impact the benefits you and your loved ones receive.
A common frustration with the social security system is that many feel as though they won’t earn back all they’ve put in. But, that isn’t commonly the case. People are living longer, and are pulling benefits for longer than what exceeds their contributions. Even as you break even, you will continue to receive your inflation-protected benefits until you pass away. Surviving spouses will receive their husband or wife’s full retirement benefit until their death.
To better understand your individual circumstances and plan for the future, you’ll want to meet with a trusted fiduciary financial advisor. Royal Oak Financial Group has nearly two decades of experience helping individuals like you make better decisions for the future. With offices in Worthington and Lancaster, we’re proud to serve our communities at a time and location that’s convenient for them. Contact us today to schedule an appointment with one of our dependable advisors.