Social Security Timing

Social Security. Probably one of the most hotly talked about topics. You know Jon, we do financial planning at Centennial Wealth at all of our locations, and what do you think we spend? 25% of our time or more talking about Social Security? Whether you’re 30 years old, 90 years old, or somewhere In-between, I feel like Social Security is somewhere on your mind at some point or comes up at some discussion. So I want to take some time today and talk about the timing of that. Now as you’re probably aware, there’s different ages that what you can collect Social Security, depending on your situations. And a lot of it comes down to We have different planning tools available to us. You know, we sit down and can map out, okay if you take it here, your spouse takes it there, if you’re single, married. Widowed or all those different scenarios start to play out. And sometimes, folks come back to us and say, you know what, I just want my money, or I … You know there is a mental reason, my neighbor did this or so and so did that, and there’s these other justifications they have for that. But there’s a lot of unique combinations that can happen out there with maximizing Social Security. Many things have been taken away per se that used to be available years ago from different combinations of “file and restrict”, “file and suspend” and some of these things that used to be available. But there’s still a lot of choices out there and it’s important to know those choices. Yeah that’s true Art. As you go back in time, we’ve been around long enough to remember all of those different options and it made it a lot more complicated back then. It’s simplified a little bit but still it’s a key part of your overall retirement plan. And I know there is A lot of press out there of when is Social Security going to change and what’s going to happen next. Obviously nobody has the answer for that for the future at this point but it’s trying to do the best that you possibly can with when to draw. And that’s where you’re going to want to take into consideration ultimately when are you fully retiring or even partially retiring and what your income actually is. So there’s going to be this full retirement age. For the majority of people it’s probably going to be age 67 currently, depending on when you were born and everything. But if you are still earning income, so W2 wages, salary, whatever it may be, there’s going to be these income limitations on what you can make and draw Social Security at the same time. So for 2025, that’s $23,400. It’s that limitation. So, maybe walk through and example, Art, of how that would work and what you want to be cautions of. Absolutely, Jon. The first thing I think of too is defining what counts towards that number, right? So it’s earned income. So this is confusing for a lot of people. Earned income is really defined by, think of it as a paycheck. You know, it’s earning money through employment, whether it’s 1099, W2. It is not passive income. It’s not rental income, it’s not interest or off of your savings account. It’s not distributions from your IRA account. That doesn’t count towards that earning limit that Jon is talking about here and stuff like that. So that’s kind of step one of knowing that. But let’s say you’re going, that you want to Semi-retire, right, or go back to work part-time. We have to be cautious if we’re drawing Social Security and we start earning too much money, they are going to start taking back, basically for every two dollars you go over that limit, they are going to start pulling back a dollar of your Social Security. So it’s a pretty significant penalty. And you’re paying tax, you know, on both of those as well, so. It can be a little hurt-some, if you will, from that perspective. So again, thinking ahead of when you’re going to retire and what your income and stuff, it’s important to start planning these measures out. Yeah, and another way to look at this is, what if it’s your desire to delay, you can delay. You can delay up to age 70. That’s when ultimately the latest is that you can draw Social Security. But is that the best choice for you? Maybe if you have other assets that you want to draw out, as an example, say it’s deferred money, IRA, 401(k), that you want to draw some of that money out. That’s taxable income and delay that Social Security. Because again, between ages 62 to 67, it’s growing, your Social Security benefits are growing at approximately 5%, from 67 to 70 about 8%. And so you’re seeing those benefits grow. It’s maybe something to look at. Okay, should you use other assets and delay Social Security? Again, it may not be the best solution but that may be something that comes into consideration. Absolutely Jon, there’s so many different factors out there, you know, longevity, and the piece you started at, your other assets. That’s the piece that so many people forget about, you know, and they don’t consider planning for that. Social Security.