Introduction

Madison: Hello, everyone, and welcome to Not Just Numbers Honest Conversations with a Financial Advisor and Lawyer. I am Madison Demora, and I am here with Mike Garry. Mike is a financial advisor and CFP and the founder and the CEO of Yardley Wealth Management. He is also an estate planning lawyer and his law firm is Yardley Estate Planning. Hi, Mike.

Mike: Hey, Maddie. How are you?

Madison: Great. Great. So, this is the second part of our series where we discuss pre-retiree education. So for the second one, we are going to discuss transforming Social Security into a winning retirement strategy. All right, let’s start with the first question. What are the basic eligibility requirements for Social Security retirement benefits?

Mike: Well, that’s a mouthful. So, to be eligible for Social Security retirement benefits, you generally need to have earned a certain number of credits for your work history, which is 40 credits or ten years, and be at least 62 years old.

Early Collection Advantages and Disadvantages

Madison: So, what are the advantages and disadvantages of collecting Social Security benefits before reaching full retirement age?

Mike: Sure. So, collecting benefits early, which can be as early as age 62, can provide immediate income, but it will result in reduced monthly payments compared to waiting until full retirement age or 70. So the decision depends on individual financial circumstances and goals. And so our basic thoughts there usually is it’s best to wait. But some people can’t afford to wait, and maybe their body’s broken down and they can’t find work or they’re just in a bad situation work wise, and they don’t have any other choice but to take it, and they have to, and it will reduce their benefits. So, I mean, that’s the advantage that it’s available. The disadvantage is you’ll likely get less over your lifetime. But not everybody’s circumstances are great. It’s a big country, and not everybody gets dealt the same hands. So yeah, so it’s a very personal decision. For people who can afford to wait, sometimes it makes sense for them to take earlier if they have reduced life expectancy, if they have something going on with them personally that makes it think that they’re not going to live to be 78 or 80, then it might make sense for them to take early, too, because of their individual financial circumstances and goals.

Spousal and Survivor Benefits

Madison: Yep. How do spousal and survivor benefits work in the context of Social Security?

Mike: Sure. So spousal benefits allow a spouse to claim a portion of their partner’s Social Security benefit, and survivor benefits provide income to surviving spouse or eligible family member when the primary beneficiary passes away.

Full Retirement Age

Madison: All right, so what is full retirement age and why is it important in Social Security retirement benefits?

Mike: Sure. So full retirement age is the age at which you can claim full Social Security benefits without any reductions. It varies depending on your birth year. Claiming benefits before full retirement age results in reduced monthly payments while claiming after full retirement age can lead to increased benefits. The big thing really, is that if you are still working a job and you collect Social Security before your full retirement age, your Social Security benefits will be reduced partially based on the income that you collect from that job. And so, once you reach full retirement age, then that’s not a thing anymore. So you could be working and collect benefits. So full retirement age for most people now is 66 and some months for people who like retired now or people who are going to retire real soon. Full retirement age for me is 67 and I’m 57. So people younger than me, full retirement age is 67.

Working While Receiving Benefits

Madison: Okay, so what happens to Social Security benefits if you continue working while receiving?

Mike: Sure. If you claim Social Security benefits before reaching full retirement age and continue working, your benefits may be subject to an earnings limit. Earnings above this limit can result in a reduction of your benefits.

Spousal Benefits Advantages

Madison: Okay, so how can spousal benefits be advantageous for couples? And can you provide an example scenario?

Mike: Sure. Spousal benefits can allow a lower earning spouse to claim a benefit based on their higher earning spouse’s work record, potentially resulting in higher overall family income. So if your spouse is a high earner and you’re not, because, you know, you, maybe you stayed home to watch the, take care of your children, or you just didn’t have a high paying career. If half of their earnings, half of their Social Security earnings income is more than what your benefit is, once they start collecting, then you can collect that half instead of the benefit that you would be entitled to on your own earnings record. And then if your higher earning spouse dies before you do, you could switch to their higher benefit and stop your own at that time.

Strategies for Single Individuals

Madison: Oh, okay. All right. So are there specific strategies that single individuals can use to optimize their Social Security benefits?

Mike: Well, single individuals can still benefit from delaying their Social Security to claim higher monthly benefits. And, you know, it may make sense to coordinate their benefits with other retirement income sources. Sometimes, I know there are some places, pension plan options where you get a higher payment before collecting Social Security and then a lower payment after. So you could retire early and still get some benefits. So, yeah, there are less claiming options, but there’s still some even if you’re single.

Steps for Survivors

Madison: Okay. All right, so what steps can survivors take to maximize their Social Security benefits after the primary beneficiaries death?

Mike: Sure. If your primary beneficiary dies on the young side, survivors can consider claiming survivor benefits at the appropriate time and in some cases, switching to their own benefits later if they’re higher.

Financial Planning and Social Security

Madison: How does financial planning fit into the process of optimizing Social Security benefits?

Mike: Financial planning helps individuals and couples determine the best timing and claiming strategies for Social Security benefits based on their overall retirement goals and financial situation. It considers factors like other sources of income and retirement savings.

Conclusion

Madison: All right, Mike, this was awesome for our series number two, is there anything else you wanted to add to the series?

Mike: No, that’s great. There’s great questions you got for me, Maddie, I appreciate it. Thank you.

Madison: Perfect. Of course. All right, so you can join us on our next episode for: Is long term care insurance something you should consider? For more information on Yardley Wealth Management or Yardley Estate Planning, you could visit our website at yardleywealth.net and yardleyestate.net. You can also follow us on socials at Yardley Wealth Management. This podcast has been produced by Madison Demora and Mike Garry with technical and artistic help from Poe Productions.