Defying the Conventional Wisdom on Social Security

Sometimes, we prefer to go against the grain when it comes to certain aspects of financial planning. If your goals are better suited by doing something other than following what passes as conventional wisdom, then we believe that’s what you should do.

Along those lines, right now it might be in your best interest to do the exact opposite of what you’ve always been told when it comes to taking your Social Security benefits. Let us explain why sometimes it’s better to defy the rules of thumb and the pundits and do something else.

Conventional wisdom says you should always wait as long as possible to take your Social Security benefits in order to take advantage of the delayed retirement credits that will increase your benefits for each month you wait, up until age 70 (unless, of course, you don’t expect to live too long, in which case taking it early is better).

And yes, sometimes that makes sense—but not always. There are actually situations where someone with a short life expectancy should delay their benefits or a person with a longer life expectancy should take their benefits early.

Let’s take a hypothetical married couple. Spouse A has a very high Social Security benefit, but their health or family history—or some combination of those—suggests they won’t live much longer than age 71 or 72. Spouse B, on the other hand, has a much smaller benefit but is very healthy and expects to live well into their late 80s or into their 90s.

In this case, Spouse A should actually delay taking their benefit—maybe all the way out to age 70—even though they don’t expect to live much past 71 or 72. And Spouse B, the healthy one with the long life, should take their benefit as soon as they’re eligible—maybe as early as age 62.

Why is this the case?

Because when we look at Social Security benefits, we have to consider the longevity of the benefit itself—not just the longevity of the owner. Spouse A has a much higher benefit than Spouse B and expects to die around age 72. If that does indeed happen, the surviving Spouse B would then lose their own small benefit and begin receiving the much larger survivor benefit (the amount Spouse A was getting) for the rest of their life—which Spouse B expects will be a really long time. 

Remember, when one spouse dies, the survivor gets the higher of the two benefits the couple was receiving. Spouse A waited to take their benefit so that Spouse B would have as large a survivor benefit as possible. And why did Spouse B with the long life take theirs early? Because there’s no point in waiting. Take the smaller checks now, knowing that the larger benefit will likely come along sooner rather than later.

So there you have it. Social Security decisions can really be tricky, and you do not want to leave money you’re entitled to on the table. We’ve got a Social Security Decision Kit that’s free for you to download, and I’d urge you to take a look at it and talk with one of our advisors before you make any move on your Social Security benefits. 

As always, if you have any questions, we’re right here to help.

Important Information:

The information provided should not be considered specific tax, legal, or investment advice and is not specific to any individual’s personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. This material was gathered from sources believed to be reliable, however, its accuracy cannot be guaranteed. 

No client or prospective client should assume that the presentation (or any component thereof) serves as the receipt of, or a substitute for, personalized advice from LCG or from any other investment professional.

The information provided is based on current laws, which are subject to change at any time. Lucia Capital Group is not affiliated with or endorsed by the Social Security Administration or any government agency.

Social Security rules can be complex. For more information about Social Security benefits, visit the SSA website at www.ssa.gov, or call (800) 772-1213 to speak with an SSA representative.

Case studies are hypothetical, are for illustrative purposes only, are not guaranteed and subject to potential federal and state law amendments. There is no guarantee that you will achieve the results discussed.

Rick Plum is a registered representative of, and offers securities through, Lucia Securities, LLC, a registered broker/dealer, member FINRA/SIPC. Advisory services offered through Lucia Capital Group, a registered investment advisor, and an affiliate of Lucia Securities, LLC. Registration with the SEC does not imply a certain level of skill or training.

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