497 | Your Social Security Questions Answered | Mike Piper
Jun 24, 2024
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Expert Mike Piper discusses Social Security benefits, including full retirement age, spousal benefits, survivor benefits, and filing for benefits. He provides insights on maximizing benefits through strategies like creating a 'Social Security bridge' and adjusting discount rates. The podcast covers key topics to help listeners navigate the complexities of the system and confidently prepare for retirement.
Consider your 35 highest-earning years to calculate Social Security benefits.
Utilize tools like Open Social Security to analyze filing scenarios and longevity risks.
Delaying benefits can increase total expected benefits over a lifetime, especially for higher earners in married couples.
Deep dives
Calculation of Social Security Retirement Benefits
Social Security retirement benefits are calculated based on your Full Retirement Age (FRA) and Primary Insurance Amount (PIA). FRA is the age at which you receive full benefits, usually around 67. PIA represents your monthly retirement benefit if you file at your FRA. It is essential to consider your 35 highest-earning years, index pre-60 earnings, pick the highest 35 years, and calculate the average indexed monthly earnings (AIME). From the AIME, a formula determines your PIA.
Spousal Benefits and Survivor Benefits
Spousal benefits are generally 50% of the primary worker's PIA, while survivor benefits can match the deceased's benefit amount. Filing strategies for max benefits involve understanding personal longevity and investment returns. Delaying benefits considers risk perspective, lifespan uncertainty, and foregone investment returns. Factors like bond returns and longevity must be weighed in decisions.
Considerations When Filing for Social Security Benefits
Deciding when to file for Social Security benefits involves weighing the trade-offs of early versus delayed filing. Utilizing tools like Open Social Security can help analyze various scenarios and longevity risks. The choice of delaying benefits as a 'mortality hedge' and accounting for investment returns, especially regarding bonds, plays a crucial role in maximizing total expected benefits over a lifetime.
Social Security Benefits for Married Couples
When one spouse in a married couple is the higher earner and waits to file for their retirement benefit, it increases the couple's total benefits per month, whether one or both are alive. If the higher earner passes away first, the survivor benefit for the lower earner is also increased. For the lower earner, waiting to file only increases the couple's benefits while both are alive, making it less advantageous than for a single person to wait. Overall, waiting until age 70 is usually the best option for the higher earner in a married couple.
Factors Affecting Social Security Filing Decisions
The age difference between spouses significantly impacts the advantages of waiting to file for Social Security benefits. The older your spouse is relative to you, the less advantageous it is to delay filing. When spouses have the same age, joint life expectancies influence the decision to wait or claim benefits earlier. Age differences result in longer joint life expectancies, making it financially beneficial to delay filing. The timing of claiming benefits in relation to each other's ages plays a crucial role in optimizing Social Security benefits for married couples.
In this episode: full retirement age, earnings, spousal benefits, survivor benefits, filing for benefits, and the earnings test.
This week, Mike Piper joins the show to talk all things social security and answer listener questions that arose from our last social security related conversation back in episode 474! Whether it is discussing the full retirement age, discussing when to file for benefits, and different situations and their correlating differing types of benefits, Brad and Mike cover your burning questions so when the time comes you can catapult yourself into retirement confident and comfortably. While the topic of social security can often be confusing, being informed and prepared based on you and your families situation can make approaching it a lot less formidable, so listen along now to be ready down the line when it is your time to file!
