At the NMX*Franklin Prosperity Report we believe Social Security should be simple. After all, most of us have only one decision to make: when to start taking benefits. But for many readers of the NMX*Franklin Prosperity Report, that decision comes with so many variables and unknowns that it can feel like aiming with a blindfold on.
The primary obstacle is that, of course, none of us knows how long we are going to live. While Social Security payments continue for life, the monthly amount can be considerably higher the longer one waits to start taking it.
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So what is the “best” time to claim Social Security? If your first thought is, “As soon as I possibly can!” we urge you to discover all the options out there. Taking benefits right away may very well make sense for you, or it might not. You owe it to yourself to find out.
Knowing your full retirement age (also sometimes called normal retirement age) is critical, because nearly everything about Social Security hinges on it. It’s the baseline, and if you start benefits right then, you will receive 100 percent of your primary insurance amount (PIA). Your PIA is the amount you’ll receive every month from Social Security if you file for benefits at full retirement age.
As Gary Marriage, Jr., CEO of Nature Coast Financial Advisors, explains, “Social Security benefits grow 8 percent every year you delay them.” An 8 percent increase per year means that the monthly benefit you would receive at a full retirement age of 66 would be 32 percent higher four years later at age 70. In dollars, a PIA of $2,000 would become a more sizable $2,640, which you’ll receive every month for the rest of your life.
For these reasons, Matthew Allen, co-founder and CEO of Social Security Advisors, a firm that provides personalized Social Security recommendations for a low fee, says that taking benefits at age 62 is generally the wrong approach for most people. “The main issue is that you preclude yourself from making better decisions,” he says, noting that those who file early aren’t able to take advantage of some of the most effective maximization strategies. “You’re locked in at that claiming date.”
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