Independent, Fee-Only Financial Advisor

Independent, Fee-Only Financial Advisor

Friday, December 11, 2020

Leaving Money on the Table

Social Security is a big part of anyone’s retirement income. On average, it represents more than 40% of overall income. Depending on circumstances, that can be more. 

It’s also a great investment. While nearly half take their benefits at the earliest time (age 62, unless you’re a widow), this decision leaves a lot of money on the table. Every month, up until age 70, that you delay taking benefits past age 62 results in 2/3 of a percent more on your benefit. That’s 8% a year! And it’s guaranteed! You can’t find that anywhere else.


It’s the reason we often encourage people to delay their benefits as long as possible. Know that the decision to start collecting Social Security and the decision to retire are two different decisions. They are not necessarily linked. For those with little savings and no pensions, starting SS at retirement is a must. It’s the only way to have income in retirement, but if you have other means, the two aren’t joined at the hip. Think twice before you pull the trigger on benefits. Much higher payments in the future may make waiting worth it.


Know that your benefits are based on your earnings record, so it’s important to monitor this for errors. Your retirement benefit is based on your highest 35 years of earnings, and these are adjusted for inflation. That makes earlier/older earnings quite important. Sign up for your own account at Social Security to track earnings and benefits. 


Employers only report earnings to SS one time a year, so your expanded benefits might not be fully reflected in your current payment. The lag in your earnings record may result in a lag in the benefit calculation. Don’t worry, though. The difference will be made up in the next year.


Now that we sign up newborns for a Social Security number, we know which baby names are the most popular. In 2020, it was Liam, Noah, and Oliver for boys. And Olivia, Emma, and Ava for girls. Hmmm… think Nancy was WAY down the list!