Retirement Spending

Cashflow Flexibility: Adjusting Social Security Benefits

You may want to delay the start of social security for the long-term benefit. But what do you live on between now and then? Perhaps you had a plan to defer benefits, but something has happened to change your situation – maybe you lost your job! What adjustments could you make?

There are a large and ever-expanding number of articles and books on Social Security describing a surprising, and even overwhelming, number of alternatives. However there is little discussion about using some of your Social Security while deferring other parts, and taking advantage of options to increase flexibility. For example, perhaps you are deferring your Social Security until age 70, but at age 69 discover you have a health condition and won’t live very long. There’s a flexibility option that allows you to receive benefits as if you had started them earlier!

There is also little discussion about using some of your Social Security benefit to live on while deferring another part of your family benefit to build for your long-term advantage.

A thoughtful and informed decision-making process can substantially improve your lifetime financial situation. In general, if your health and longevity is at least average compared to the whole US population, you are better off not to start Social Security benefits early – to wait to start benefits.

Delaying start of Social Security benefits can be an important wealth-building and risk reduction step, for several related reasons.

  • The later you start, up to age 70, the bigger your benefit will be for the rest of your life.
  • Benefits are tax-advantaged – yours may be completely tax-free, but is always at least partially tax-free.
  • Delaying start pushes the maximum amount of money into your oldest years – you can’t outlive it. Your eldest years are often when you have the fewest choices and highest financial risks.
  • Delaying the start pushes gives you the largest total benefits over your lifetime if you live past your life expectancy.
  • The benefits are inflation adjusted (unlike most traditional pensions). If inflation were 3% a year, if you start benefits at age 70 your benefit will be twice as big at age 93.
  • Benefits are “automatic money.” They just keep showing up in your bank account. Once started, there’s very little you can do to goof them up.
  • Delaying your benefit can increase your spouse’s benefits, maximizing what the two of you receive over your combined lifetimes.

But with all that going on, can you be a bit more flexible and respond to changes? Social Security Flexibility reviews several flexibility-building actions you could take.

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