Are You Making One of the Top 3 Common Social Security Mistakes?
Did you know there are around 8,000 strategies available for couples and more than 2,700 separate rules on Social Security benefits? Most people try to navigate Social Security on their own and often times, do not explore all their options. According to a recent report by Financial Engines, couples often leave an estimated $100,000 in benefits on the table. Below are the top 3 mistakes to avoid when it comes to when and how you should draw your Social Security Benefits.
Mistake #1: Not planning for opportunity cost
Have you weighed the cost of waiting to take Social Security against how the withdrawals from other retirement funds may impact your portfolio? It is important to understand how your claiming strategy affects the amount of money you will be drawing. For example, if you wait to take Social Security, you will be drawing more money from your portfolio.
Mistake #2: Not integrating tax planning
Are you aware of the potential tax implications of a specific strategy and how you will be taxed on your Social Security payments? For married couples filing jointly, with income between $32,000-$44,000, may have to pay taxes on half of their benefits. With income above $44,000, up to 85% of the benefits can be taxed. For single filers with an income level between $25,000 and $34,000 are taxed at 50% and income above $34,000 can be taxed at 85%.
Mistake #3: Overlooking spousal options
In some cases, it make sense to use the “file and suspend” strategy, where the higher earning spouse can file for benefits, then immediately suspend them, allowing the monthly benefit to continue to grow even if the other spouse receives the spousal benefit.
When and how to draw your Social Security benefits is an important decision and for some of you, may have a significant impact on your financial security in retirement. In addition, how you manage your other retirement assets with Social Security is equally important. My recommendation would be to have a Complete Planning Review to see if you have any money falling through the cracks. You are welcome to give your office a call (775) 853-9033, we would be happy to speak with you.