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Deciding when to receive retirement benefits for social security is a crucial decision, regardless of when it is made.
Making that call during the coronavirus pandemic can increase the stakes.
This is because the age at which you decide to request a refund will block the amount of monthly income you take in for the rest of your life.
If you apply as soon as you are entitled ̵
Delay until the age of 70 and you get an increase of around 8% for each year pending full retirement age.
Postponing social security until then has always been difficult. It is based on the combination that your health, income and career will endure.
Now, during the coronavirus pandemic, one or all three of these factors may seem wilder than ever.
In the meantime, recent research indicates the idea that the social security trust funds, which underlie the system, may run out earlier than previously expected.
These factors may lead you to ask yourself if you should change your strategy. Here are the most important questions to consider when evaluating the complaint decision.
Do I have to request in advance why the trust funds are running out?
Recent research by the University of Pennsylvania’s Wharton School has found that social security trust funds may run out four years earlier due to the coronavirus pandemic.
This would push the date on which they are expected to expire in 2032 instead of 2036.
However, this does not mean that at that point there would be no benefits at all. The most recent estimate by the Social Security Administration sets the exhaustion date to 2035, at which point 79% of the promised benefits will be paid.
To anticipate these changes, people should try to save more towards retirement, said Kent Smetters, director of the Penn Wharton Budget Model faculty, a non-partisan research organization at the school.
If people’s reaction to this recession is something like the Great Recession, they may be tempted to seek benefit first. The Boston College’s Center for Retirement Research found that the previous recession has pushed over 5% of the eligible population to start receiving checks at age 62.
But fears about funding alone shouldn’t cause anyone to claim early, said Joe Elsasser, president and CEO of Covisum, a social security software company.
“You’re going to start thinking, ‘Would my cash flow situation still be OK if I received that kind of reduction in benefits?” Said Elsasser. “If not, there are many ways to plan.”
This includes less anticipated spending or retirement. “Advance request does not solve this problem,” said Elsasser.
Does waiting until 70 still make sense?
The short answer to this question is for most people, yes.
This is because it is difficult to find an investment with the same guaranteed return, particularly in a low interest rate environment.
“What you can get in return on equally safe investments is very close to zero,” said Elsasser.
In the meantime, stock market investments are often too risky.
If you’re around 60 and lost a job, you should only ask ahead if you don’t have any other sources of income, Elsasser said.
“If you have equity or have 401 (k) or IRA savings, it is absolutely worth considering using these sources of income to bridge the gap during a period of delayed social security,” said Elsasser. .
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People who can justify taking social security checks early include single men or women who have health problems. Otherwise, everyone should try to delay, especially those with high earnings who could also trigger greater benefits for their expectant spouses, said Elsasser.
If you decide to request in advance, there are strategies that you can apply if you change your mind later.
Once you start receiving checks, you have up to a year to withdraw your application. But you can only do this once in a lifetime. And you have to repay all the benefits you received.
Another strategy is to apply now and then to suspend full retirement benefits and grow them up to 70. But you have to be willing to live without those monthly checks during that time.
“Taking benefits for one year and stopping them at full retirement age could be a good way to restore the loss of an early retirement benefit,” said David Freitag, financial planning consultant for MassMutual.
Where can I ask for help?
Covid-19 forced the Social Security Administration to close its field offices. Currently, there is no indication of when they can reopen.
“At the moment we are unable to accept visitors in person at our local offices, except by appointment for situations of extreme necessity,” said the Social Security Administration in a statement.
Since office visitors are often older, they are more at risk of serious disease, the agency said.
“Our goal is to continue serving the American public while doing everything possible to reduce the risk to our employees and visitors,” said the agency.
The good news is that most services are available online or over the phone.
If you want help resolving your complaint decision, there are better resources to turn to, said Elsasser.
Your decision regarding your social security claim should be coordinated with all the financial assets you have accumulated, he said.
A tool called Maximize My Social Security is a “strong and reliable tool,” said Elsasser. It costs $ 40 for an annual home license.
Another way is to meet a financial advisor who can help you come up with a plan. You will probably have to pay a board fee. Just make sure the professional you meet is truly experienced in the complexity of social security planning, said Elsasser.
“The easiest way is to just say, ‘It makes a lot of sense. Show me the math,” said Elsasser. “They should have done some sort of exercise that they can demonstrate in the software tool they use to show you why.”