In order to make your ride into the sunset of retirement as enjoyable as possible, when should you apply for social security retirement benefits?
It's an important question to ask; no matter where you are on your retirement planning journey. But the answer can get complicated - and a few years can make thousands of dollars difference in your benefits.
Before you apply for retirement benefits, Schulte & Company can provide an analysis that, considering your projected longevity and financial capabilities, will detail the exact month in which you should begin your social security retirement benefits.
HOW LIFE EXPECTANCY FITS INTO IT
Most people apply for Social Security retirement benefits when they become eligible at age 62, or soon after. For many, if not most, that's a costly mistake. Here's why:
The amount you get increases sharply the longer you delay starting benefits. Someone who would get $17,200 a year starting at 62 could boost her benefit to $24,600 (43 percent more) at her full retirement age of 67 or to $30,500 (77 percent more) at age 70.
Most people live beyond the projected break-even point -- where the amount they get from waiting exceeds what they would have collected by starting early.
A premature start reduces survivor benefits that a widowed spouse may have to live on later in life.
The advantages of delaying are so great that many financial planners recommend tapping other retirement funds first (such as 401(k)s and IRAs); if that allows someone to put off applying for benefits.
On the flip side, waiting too long to begin benefits can also be a problem. People may not live as long as they think, which can result in money left on the table.
It pays to understand all your options and to make an educated choice.
WHY BEING SELF-EMPLOYED MATTERS
Social security is funded by a 6.2% deduction from an employee's wages and a matching 6.2% contribution from the employer. But when your self-employed, you pay both the employee and employer portion. In other words, a self-employed person pays twice as much for the same retirement benefit. The good news is that a self-employed person may be able to control the social security tax; ensuring that the amount they pay in social security taxes makes sense when compared to what they may get when they retire.
For self-employed clients, we recommend a social security analysis several years before your planned retirement age. This enables our self employed clients the ability in impact their retirement pay significantly.