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Timing is Everything When it Comes to Social Security

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Wednesday, August 1, 2018

A huge number of Americans retire each year. In fact, more and more Baby Boomers began 2017 by exiting the workforce. The number of Americans at retirement age (65 or older) no longer in the labor force rose by 800,000 in the fourth quarter of 2016.

Retirees and future retirees depend on income from Social Security to help provide a financially comfortable lifestyle. But when it comes to claiming your benefits timing is everything, and delaying your Social Security claims could result in a bigger payout.

Your Social Security benefit at full retirement age is based on your highest 35 years of earnings. [1] But what if there is a low or zero income year in those top 35 years? By working an extra year in your late career, you could increase your payout by raising the amount in those top 35 years.

For 46% of women and 15% of men, working until age 63 instead of 62 replaced a zero-income year in that calculation, according to a new working paper from the Center for Retirement Research at Boston College. 

If late-career earnings replace a zero in the calculation of your benefits, you could see an increase in the benefit you're entitled to at full retirement age.

The big benefit of delaying is in the actuarial adjustment of when you claim Social Security in relation to your full retirement age. Claiming before your full retirement age permanently reduces your benefits;  each year you delay from full retirement age until you turn 70 boosts the total by 8%. 

Someone who retires and begins claiming Social Security at age 70 would receive a benefit that's 76% higher than the one he or she would receive at age 62, according to the study. Factor in late-career earnings replacing a zero-income year, and the increase becomes as much as 88% for women and 82% for men. 

Women stand to benefit most from working longer because they tend to have more zeroes in their earnings record. Women work an average 29 years to men's 38, and they spend an average 5.5 years out of the workforce caring for children, and 1.2 years out as a caregiver for an older adult.

Get a copy of your earnings record from Social Security to see how much impact late-career earnings would have on your benefit.

Keep in mind that you might also have access to benefits based on the record of a spouse or ex-spouse. That benefit could already be larger than what you'd be entitled to with a few more work years under your belt.



Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities.

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.

These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable-- we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

David Lerner Associates does not provide tax or legal advice. The information presented here is not specific to any individual's personal circumstances. Member FINRA & SIPC.


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Founded in 1976, David Lerner Associates is a privately-held broker/dealer with headquarters in Syosset, New York and branch offices in Westport, CT; Boca Raton, FL; Lawrenceville, NJ; and White Plains, NY. For more information contact David Lerner Associates Call 800-367-3000 Visit our website: www.davidlerner.com

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Jake Mendlinger
Account Manager
516.829.8374 X 232

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