Happy Easter - Social Security Strategy

Happy Easter to you and your family on this special day. This will briefly discuss the principles for developing a strategy of when to take Social Security benefits. Information from Vanguard is at the beginning. At the end are some Easter quotes.

Vanguard

Although a credit-rating agency's warning about the outlook for the U.S. government's debt burden dominated headlines this week, reports on the economy were more optimistic. The housing market, though weak, showed some improvement, and leading economic indicators showed an economic recovery that remains on track. For the week ended April 21, the S&P 500 Index rose 1.3% to 1,337 (for a year-to-date total return—including price change plus dividends—of about 6.9%). The yield of the 10-year U.S. Treasury note fell 3 basis points to 3.40% (for a year-to-date increase of 10 basis points).

Social Security Strategy

Some of the biggest decisions that a person or couple can make is how and when to take Social Security benefits. Unfortunately, little planning seems to be given to optimizing these benefits. Recently, I had lunch with a friend and client to discuss a strategy which is why I am writing about it today. Yes, Social Security will be around for a long time. A strategy should be developed around who is the primary and who is the secondary recipient and the age of the recipient.

The concept is to take Social Security benefits as soon as you can to reduce debt, like car loans and your mortgage. For the average person, it is important to have no debt in retirement. For a couple, the idea is to shift income to a spouse while still contributing and growing future benefits.

Example 1: If you own a business, you can reduce your income from the business and shift it to your spouse. In this manner you can collect benefits and your spouse can build-up their Social Security benefit while having more total income as a couple.

Example 2: If the situation is a working and getting paid spouse, who is the primary recipient, and a working but not getting paid spouse, who is the secondary recipient. The strategy is for the secondary recipient to collect as soon as possible and for the primary recipient to work as long as possible. In this manner the total income goes up and with the primary recipient working the annual amount will continue to increase.

Bottom Line: If you are going to be applying for Social Security benefits soon, please contact me so that we can discuss a strategy.

Easter Quotes

The resurrection gives my life meaning and direction and the opportunity to start over no matter what my circumstances. ~Robert Flatt

The joyful news that He is risen does not change the contemporary world. Still before us lie work, discipline, sacrifice. But the fact of Easter gives us the spiritual power to do the work, accept the discipline, and make the sacrifice. ~Henry Knox Sherrill

Easter is the demonstration of God that life is essentially spiritual and timeless. ~Charles M. Crowe

Let every man and woman count himself immortal. Let him catch the revelation of Jesus in his resurrection. Let him say not merely, "Christ is risen," but "I shall rise." ~Phillips Brooks

On Easter Day the veil between time and eternity thins to gossamer. ~Douglas Horton

Easter spells out beauty, the rare beauty of new life. ~S.D. Gordon

Where man sees but withered leaves, God sees sweet flowers growing. ~Albert Laighton

But from this earth, this grave, this dust, My God shall raise me up, I trust. ~Walter Raleigh

He takes men out of time and makes them feel eternity. ~Ralph Waldo Emerson

For I remember it is Easter morn, And life and love and peace are all new born. ~Alice Freeman Palmer

We live and die; Christ died and lived! ~John Stott

Those have a short Lent, who owe money to be paid at Easter. ~Benjamin Franklin

Let the resurrection joy lift us from loneliness and weakness and despair to strength and beauty and happiness. ~Floyd W. Tomkins

And he departed from our sight that we might return to our heart, and there find Him. For He departed, and behold, He is here. ~St Augustine

The story of Easter is the story of God's wonderful window of divine surprise. ~Carl Knudsen

Our Lord has written the promise of the resurrection, not in books alone, but in every leaf in spring-time. ~Martin Luther

Well pleaseth me the sweet time of Easter
That maketh the leaf and the flower come out. ~Bertran de Born

Easter tells us that life is to be interpreted not simply in terms of things but in terms of ideals. ~Charles M. Crowe

Social Security Strategy - Payback Method

This Social Security Strategy involves paying back benefits to get a higher future monthly benefit. This strategy is not widely publicized and can make sense in specific cases.

Here is how it works. You have been collecting Social Security benefits for years and have reached age 70 in a situation where you have a large nest egg and desire more cash per month. Also the age of the spouse is importand and it may make sense if a spouse is considerably younger than you that has benefits calculated upon your contributions.

Scenario:

You retired at age 62 with a benefit check of $1,200/month. The amount would have been $1,600/month if you had retired at age 66. At age 70 the amount would have been $2,100/month.

At age 70 you decide that you want the higher monthly benefit and file Form 521. You can get it by paying back all of your benefit checks, about $115,000. Once all of the paperwork is done in a few months you can then get the increased monthly payment.

When does this strategy make sense:

1. You are going to live at least to age 85.
2. Your spouse's benefit is based upon your contributions and is much younger. In this case the spouse gets your benefit for the remainder of his/her life and lives a long life span.

In most cases this strategy does not make sense since nobody knows how long they will live. If you have this much money invested you likely will make more money by keeping it invested and drawing from the investment rather than giving it back to the government.

You owe it to yourself to consider this option in your retirement planning. Have a professional walk you through the scenarios to determine if this strategy works for you.