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Social Security — What’s the Impact of Your Decision?

By Smedley Financial

Published: Monday, Feb. 25 2013 12:00 a.m. MST

Facts About Social Security

Choosing a lifetime of less money when you could have more is not the result retirees want. In fact, when it comes to determining your retirement income, you probably want the maximum amount possible.

The choice you make when beginning Social Security benefits could have you missing out on tens of thousands of dollars over your retirement years.

I know what you're thinking...you've heard this all before. But it's true. There are many options available when taking Social Security benefits. The problem is few individuals are aware of all of their options or the strategies to maximize their benefits. Consider these scenarios.

Scenario 1

John just turned 62. A few months ago the company he was working for closed its doors and John found himself without a job. He had always planned on working until he was 66 but had not been able to secure a position. In need of income, John decided to begin his Social Security benefits.

Three months later John secured a job with a new company. Now he receives a regular paycheck as well as Social Security benefits. The problem is John doesn't need the Social Security income. In fact, he has to pay an earnings penalty because of his young age and earned income. In addition, he will not benefit from the delayed credits he would have been entitled to had he waited to start taking Social Security at a later date.

All is not lost; John can have a do-over. He can withdraw his Social Security application, repay the amount received (without interest), and apply at a later date. This option must be exercised within 12 months after the original application date and can only be done once in a lifetime. By taking advantage of this strategy John can lock in a larger benefit when he fully retires and avoid paying penalties.

Scenario 2

Mark and Liz are 66 and 62 respectively and have both worked full careers. Mark wants to continue working but Liz is ready to throw in the towel. They are concerned about the future of Social Security and want to make sure they get their fair share of benefits. They also want to receive the highest benefit for Liz throughout her life.

Mark and Liz have several options available to them. One option is for Liz to start her benefits now based on her earnings record. She will receive this same benefit (not accounting for COLA increases) throughout her retirement years. Because she has not reached Full Retirement Age (FRA), she will not receive the highest benefit possible. This option will lock her benefits in at a reduced amount.

Another option is for Liz to claim benefits now based on her own earnings record and then when Mark has retired and she has reached FRA, she can opt to take her spousal benefit. This would be advantageous if Mark had higher earnings and therefore was entitled to a larger benefit.

In addition to these two options, there are at least three more options available to Mark and Liz. Each increases the lifetime benefits they can receive. We don't have enough room in this article to go into detail about each available strategy.

The bottom line: maximizing Social Security benefits can make or break your retirement income plan. Take the time to understand how Social Security works and examine each of the options and strategies available to you before claiming your benefits. You've paid into the system your entire working career. Doesn't it make sense to take some time to get back what you deserve? Engage the knowledge of Smedley Financial's experienced planners who can help you assess each strategy and determine how it will impact you financially. Call for a free review (800) 748-4788 or visit us online at SmedleyFinancial.com.

Smedley Financial Services, Inc.® is an SEC Registered Investment Advisory Firm. Sharla J. Jessop is an Advisor Representative of Smedley Financial Services, Inc.® and Registered Representative of Securities America, Inc. Securities offered through Securities America, Inc. Member FINRA/SIPC. Smedley Financial Services, Inc.® and Securities America, Inc. are separate entities. Copyright © 2012 Smedley Financial Services, Inc.® All rights reserved.