I am a big believer in repeating certain concepts as a form of reiteration but also because it can take more than one time for something to click. From my life, this pertains to many aspects of firefighting, diet/exercise topics and investing/financial planning including what I'd like to talk about today which is Social Security.
Say what you want about the Social Security Administration (SSA), they do want you to know the basics of what your benefits, the jargon here is primary insurance amount (PIA), is slated to be and how much less it would be if you take your benefit early or how much it would be if you take it late. We all either get an annual Social Security statement in the mail or via email if you have an account at the SSA website. I just got my annual email from them and this is what it showed in today's dollars.
I moved the slider to 68 years 6 months just because it is a mid-point between my full benefit and my delayed benefit. There's no level of financial planning engagement that shouldn't include keeping track of your PIA and understanding that you get less taking it early and more by waiting.
If you read just about any article about Social Security, the article itself will probably lean toward waiting until you're 70 to take it and the comments will almost always skew heavily toward taking it as early as you can. My standard reply on this point is that there is no single right answer for everyone. There are some tax inefficiencies that go with taking it early if you are still working. Learn about those if you want to take it early and still work.
There are probably more reasons to take it early than to wait. My preference has been and continues to be to wait as long as possible in case I die early, my wife would get the larger survivor benefit. It makes more sense for my wife to take a spousal benefit than her own benefit. If she waits until 67 then she'd max out at half my PIA, half of $3423/mo or $1711.50. I don't think it is necessary to wait to take her benefit. If we took it at the exact same time when I turn 70, she'd be 64 and she'd get about $1332/mo.
What are your numbers? How far do they go to covering your basic expenses? Are your basic expenses likely to change by the time you start to take Social Security? Do you need other sources of income? What are your most likely other sources of income? I imagine if you're reading this you have some sort of investment portfolio (IRA or the like). Are those two enough? Do you have others? If having enough from those two is too close of a call for comfort are there any other sources of income you can cultivate to be part of your solution?
I think I am viewing Social Security as my primary income source when I eventually take it only because once I do start it, I will have it until the end. It may or may not be our largest source of income but at some point my income from my day job will erode to almost nothing and the income from our rental could go away if at some point we decide we don't want to do that work anymore.
For now, Social Security is a fall back in case every other thing goes wrong in our life. I think of it in terms of can we last for the 5+ years if I had to take at 62? How long could we last past 62 if everything else unraveled?
From the time I first started blogging I've been exploring all sorts of ideas to create income streams in retirement, influenced by what I saw people here in Walker doing. I wrote many posts about my neighbor with a backhoe having all the work he wanted at $65/hour as a post retirement gig. I would quip, how many hours a week at $65 per, would you need to supplement your retirement income? That was 15 years ago so think of it in today's dollars.
I don't just write about this, I practice it. I've written extensively about potential opportunities stemming from my long time involvement as a volunteer firefighter. About a year and half ago I became a research volunteer for a foundation that awards grants to non-profits (this came from my involvement with the FD). There is an income opportunity down the road within this group. It may never happen but the work I am doing as a volunteer is a blast, I didn't know there was the potential for an income stream from it when I said yes to volunteering.
Who knows if I will ever be able to monetize my writing again but I have done so twice before so why not again, and hopefully it is obvious how much fun these posts are for me. I recently picked up a new hobby that I might be able to monetize at some point, putting snow chains on tires!
That's a joke but between fire trucks and our vehicles, it has practically become a hobby.
This entire aspect of retirement lifestyle planning depends of having the physical optionality to do whatever is relevant to your experiences. Based on a lot of grim retirement savings numbers, a lot of people are going to need to figure out how to generate income beyond Social Security well past a "normal" retirement age. That is one reason why I bang the drum so loudly about diet and exercise. I also have personal reasons and fire department reasons for this too.
One last thing, one thing people will push back on, rightfully so are potential cuts to Social Security. The amount and date are kind of floating targets but something like a 23% reduction sometime around 2033-2035. Do you believe there will be cuts to Social Security? If so, then factor that into your planning. Maybe everyone should factor that in, better to plan for a cut that never comes than the other way around. If there was a 30% haircut then my PIA would drop to $2396/mo and my age 70 benefit would be $3000 on the button. If that happens would your plan still work? There's nothing you could do about this outcome (a cut to benefits) so if your plan won't survive a cut that is bigger than anyone is talking about, it's time to roll up the sleeves to start to figure it out, start to cultivate new things that could pay off in your future.
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