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4 Factors to Consider Before Claiming Social Security Amid Market Chaos

4 Factors to Consider Before Claiming Social Security Amid Market Chaos

By    |   Tuesday, 10 March 2020 09:16 AM

If the seemingly endless plunge in U.S. stocks has you contemplating taking your Social Security benefits now, you would be best advised to take a deep breath and consider some key factors.

While that guaranteed income can seem like a welcome safety net, you could be setting yourself up for a lifetime of decreased benefits, CNBC recently cautioned.

“Long term, it’s better if possible to wait,” said Heather Schreiber, founder of HLS Retirement Consulting.

That’s because if you start taking retirement benefits at age 62, the earliest date at which you can claim, you will take a permanently reduced benefit, CNBC explained.

Only at full retirement age — generally 66 or 67, depending on the year you were born — do you receive 100% of the benefits you have earned. And if you wait until age 70, you can boost your benefits by up to 8% per year, CNBC explained.

Consider these four factors about claiming benefits:

Review your retirement plan: Such a market rout shouldn’t only stress-test your Social Security plan, but rather your entire current financial and future retirement strategies as well.  “We have no idea how this is going to pan out,” said Joe Elsasser, president and CEO of Covisum, a Social Security claiming software company. “And that’s why this should be less of a Social Security question and more of a financial planning question.”

Tap emergency funding first: Need cash now? First, take money from an emergency fund, if you have one, Elsasser recommended. Then consider taking from the bond side of your portfolio and cut personal spending. “Only after you’ve explored those would I consider claiming Social Security early,” Elsasser said.

Change your already filed decision: The good news is that if you have already hit the panic button and are claiming your benefits early, you can undo your decision. But be aware that you only have 12 months for a do-over. And you can only reverse your claiming decision once in your lifetime. One big catch: You will have to repay any benefits you received during that time.

Consider a voluntary suspension: If you still feel you have to take Social Security benefits early, you may also want to consider revisiting your decision once you do reach full retirement age. At that point, you can use a strategy called voluntary suspension. By doing that, you stop receiving benefits, which will give you delayed retirement credits. For every 12 months you stop getting checks, you can earn an 8% delayed retirement credit.

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Even as you see your 401(k) and other retirement investments decline, you should pause before you start drawing on your Social Security benefits earlier than you originally planned.
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Tuesday, 10 March 2020 09:16 AM
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