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Social Security... Strategy?

What You Need to Know:  When to Take Social Security.  

One of the most important financial choices you'll make in your life.

Believe it or not, it ranks right up there with buying a house, deciding upon whom to marry, and mastering the power of compounded interest at an early age.  Especially with the rapid advances of medical science just in the past 10 years, it's not out of the realm of possibility that we could all soon be living well into our 100's. What type of savings must you have to retire on that can sustain you for thirty to fourty years?

At Scholfield Wealth Management, Inc. we can work with the complexities of your social security options and provide potential outcomes for a number of choices to faciliate confident decisions.

Won’t Social Security Completely Run Out of Money?

It's not very likely in our lifetimes. Each year the Social Security Fund Trustees release their report about the state of the fund. Their 2015 report predicted that assuming there were no additional legislative changes to the program, there would be enough to pay out promised benefits until 2034+/-; after that, about 75% of all the benefits could still be paid out. Recently we saw the passing of the Bipartisan Budget Act of 2015, which eliminated two important claiming strategies, and that number was subsequently now revised upwards to 79%.

Social Security remains well-funded. With the economy in recovery, in 2015 Social Security's total income will exceed its expenses by over $9.2 billion, a trend they expect to continue through 2019. The Trustees report there is now nearly $2.79 trillion in the Social Security Trust Fund, which is $25 billion more than last year, and that it will continue to grow by payroll contributions, income taxes paid on benefits, and interest on the Trust Fund's assets.

What You Need to Know:  Social Security Rules are Vast and Complicated

There are literally hundreds of claiming combinations. And there are important choices you will need to make, which you may or may not already know about.

The temptation to claim early is there for many people, “I’ve paid in so much, I don’t want to leave any money on the table when I die...” However, from our experience, from a social security income point of view, the real pain for people isn’t when they pass away early. It’s when they live longer than they expected. When they run out of additional savings and income sources and are forced to live exclusively on their social security income.

We’re in the business of sourcing sustainable income and a lifetime of dignity for people. And factoring in the optimal strategy to claim social security is often one of the most important elements that is largely overlooked by many. 

Counterintuitively, research shows that the larger the social security payout, the less that may need to be withdrawn from other sources, like the $700,000 portfolio beginning balance in the illustration below. 

Source: Meyer and Reichenstein "Social Security: When to Start Benefits and How to Minimize Longevity Risk." Journal of Financial Planning. March 2010.  See for additional examples. 

You May Have Some Important Choice Points

Benefits are determined by a combination of factors including:

  • How much you earned over your working lifetime

  • The age at which you apply for benefits

  • Your marital status

Log in to  for your current expected Primary Insurance Amount (PIA) monthly payment at full retirement age.

Filing as early as possible for your benefits before full retirement age subtracts from your PIA by as much as -25%, and it limits any additional claiming options. Delaying retirement credits can increase the PIA amount by as much as +32%.

Case Study

This is a hypothetical case study and actual results may vary, as individual circumstances will be different in each case.

~ George was born in 1954, with a life expectancy of 78 based on his family history, and has a PIA of $2,663. His wife Alice was born in 1956, and has a PIA of $1,312 and a life expectancy of 95. They have options that include one that’s more strategic (green graph) or filing early (red graph).  Notice the difference in the scale between the two as well.  The red graph showing the early payout never gets to the high of $40,000 per year, and the green graph showing the optimal choice points that are possible never gets below $40,000 after the 6th year of beginning Social Security distributions for the remainder of the second person's lifetime.  Do you think waiting 6 years could be worth that type of income potential for the remainder of your life?  Sometimes, right? It depends on a lot of factors.  Surely you'll agree it would be nice to know what the options look like before you commit to any one choice or another.   


Here is what George and Alice did to achieve the optimal strategy rather than both filing early:

~ Alice begins payouts at 62 on her earnings of $973/month

~ George files a restricted application for spousal benefits only in the amount of $656 age 66

~ George moves to his own deferred benefits age 70 of $3,515, at which point Alice at 68 adds spousal benefits for a total estimated amount of $992

~ Finally, upon George’s passing, Alice switches to survivor benefits of $3,515, for the remainder of her life.

By making these choices, they are able to increase their total lifetime payout from $1,050,070 and a maximum monthly amount of $2,984 to the new total of $1,335,716 and maximum monthly amount of $4,508.

Waiting 6 years added a total of $285,646 to their overall retirement income to draw from.  

Another Important Thing To Know: Your Terms

The other challenging piece of this is knowing how to convey exactly what you want to do at the Social Security Office. There’s a difference between “Filing,” “Filing a Restricted Application for Spousal Benefits,” “Filing for Survivor Benefits,” etc. and mistakes on the use of those terms can be costly and nearly impossible to undo. 

We provide our clients a printout of the various strategies and the exact steps and the language to use when they go to a social security office, to minimize the chance for mis-steps. 

If you'd like us to prepare a custom analysis for you, call our office and we can set up time together.