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Deciding When to Take Social Security Benefits

Unmarried? What You Need to Know about Estate Planning
An 8.7% cost-of-living adjustment for 2023 will provide Social Security beneficiaries with the biggest boost in four decades.

Social Security beneficiaries are now receiving an 8.7% boost to benefits, the largest Cost of Living Adjustment, or COLA, in forty years. However, this doesn’t mean everyone eligible for Social Security benefits should jump on the bandwagon, says a recent article, “Approaching age 62? What you need to know about Social Security’s 87% cost-of-living adjustment and claiming benefits” from CNBC. Deciding when to take Social Security benefits warrants assessing several factors, according to Beck, Lenox & Stolzer Estate Planning and Elder Law.

For most people, claiming Social Security benefits when they become eligible at age 62 means monthly checks will be reduced compared to those they’d receive if they waited to reach Full Retirement Age (FRA), which varies from 66 to 67, depending on when you were born. At that time, they will receive 100% of the benefits earned. Put off claiming Social Security even longer—until age 70, when benefits max out—and enjoy a healthy 8% boost for every year delayed after FRA.

The recent COLA boost increases what’s known as the primary insurance amount –the benefit due to taxpayers at their full retirement age—every year after you turn 62. Therefore, people who are 63 in 2023 will get the 8.7% COLA, whether they’ve claimed benefits or not. The longer they wait, the higher the benefits, since discounts for early claiming are reduced over time.

In simplest terms, the longer you can wait, the better.

For current beneficiaries, the COLA is calculated based on their benefit amount. The longer you wait to claim, the bigger your benefit and as a result, the larger COLA you’ll receive. If you claim Social Security earlier, you’ll still get the same 8.7%. However, it will be based on a reduced benefit amount.

How would you make up for the shortfall? Some taxpayers will need to tap retirement investment portfolios if they have assets to draw from. Given the recent rocky state of markets, they may be drawing down from smaller portfolios to maintain their standard of living.

Even if you’re not planning on taking Social Security benefits any time soon, you should be checking your Social Security statements regularly as you get closer to retirement age. You want to be sure your earnings are being correctly recorded. The sooner you catch any mistakes, the easier they are to fix.

Something else to consider when doing the calculations for retirement: will your spouse rely on your benefits for income? The longer you wait to claim benefits, the higher your benefits will be, and the higher the amount your surviving spouse’s benefits will be.

This is a highly personal decision and depends on more than age. For instance, if you or your spouse have a family history of long-living, or if one or both of you has a chronic health condition, you may feel differently about waiting to take benefits. Every situation is different, and each requires a thorough consideration of the entire retirement picture.

Your estate planning attorney is a good source to bounce ideas off of, whether or not you have already done some estate planning and asset protection. If you do not currently have an estate planning attorney and you live in Missouri or Metro East in Illinois, feel free to go to our Beck, Lenox & Stolzer website and book a free call with one of our attorneys.

Reference: CNBC (Jan. 10, 2023) “Approaching age 62? What you need to know about Social Security’s 87% cost-of-living adjustment and claiming benefits”


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