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What Role Does Social Security Play in Your Retirement Income Plan? Thumbnail

What Role Does Social Security Play in Your Retirement Income Plan?

Income Planning

By Beau Henderson, RICP®, CLTC®, Certified Financial Fiduciary®

Are you nearing retirement and wondering how Social Security will fit into your future plan? If so, you are not alone. Considering there are over 500 ways to claim your benefits and only 6% of retirees claim their benefits correctly, it can be an overwhelming process to figure out which strategy makes the most sense for you. Thankfully, you don’t have to do it alone. 

At RichLife Advisors, we are here to help you optimize your Social Security claiming decision and make the most of your benefits as you head into retirement. Read on to learn more about the role Social Security plays in the average retirement plan and what you can do to optimize your benefits.

The Three-Legged Stool Is Broken

There are three main components to most retirement plans: Social Security, pension benefits, and withdrawals from savings. If retirement was a stool, then these components would be the legs holding up the seat. 

Having all three “legs” is ideal, but it’s not always realistic. Pensions have become less and less common as employers shift toward other forms of deferred compensation and only about 31% of Americans will retire with pension benefits at all. Another report suggests that only 7% will retire with all three retirement legs. 

If you are part of the majority of Americans who won’t be able to rely on a pension, your Social Security will play an even bigger role in your retirement plan and benefit optimization should be your top priority. 

How Big Is Your Income Gap?

One of the most important aspects of retirement planning is quantifying how much your retirement will cost versus how much you will receive from Social Security. 

Let’s take a look at the numbers: 

  • Maximum benefit payment at age 62: $2,364 per month
  • Maximum benefit at full retirement age: $3,345 per month
  • Maximum benefit payment if you wait until age 70: $4,194 per month

The average cost of retirement for retirees between the ages of 65-74 is $53,916 annually, or $4,495 per month. When compared to the maximum benefit amounts listed above, this means that if Social Security is your only source of retirement income, you could be looking at a deficit between $301 and $2,131 per month!

It’s easy to see just how big of an impact Social Security can make on your retirement plan, which is why planning ahead is a vital part of maximizing your benefits.

Crucial Claiming Decisions

Planning ahead involves understanding two important claiming decisions that can help to optimize your total lifetime benefit:

1. When to Claim Benefits

Social Security benefits can be claimed between ages 62 and 70. However, the timing of benefits will impact the total amount received. Benefits claimed at 62 will result in a reduced monthly amount, while waiting until full retirement age will allow you to receive your full primary insurance amount, which is the full benefit that you have earned based on the amount you’ve paid into the Social Security system. If you don’t need your benefit at this age, you can delay your claim. For each year that you delay, your benefit will increase by 8%, for a maximum possible increase of 32% at age 70.

2. When to Claim Spousal Benefits

Deciding how and when to claim spousal benefits will depend on your unique financial situation and should be reviewed thoroughly in the context of your overall retirement plan. In general, the lower-earning spouse may choose to begin collecting benefits early, while the higher-earning spouse may wait until age 70. This will allow the couple to make use of the lower benefit, while allowing the higher benefit to grow to its maximum amount.

Social Security & Your Retirement Plan

At RichLife Advisors, we believe planning for retirement should be exciting—not overwhelming. Because Social Security is just one piece of the retirement puzzle, it’s important to look at all the variables in order to see exactly where and how Social Security fits. 

The best way to take the stress and anxiety out of retirement, and your Social Security claiming decision, is to review your financial situation early and often. Don’t leave benefits on the table by guessing; instead, partner with a financial professional who can analyze and support your overall retirement plan.

If you are nearing retirement and have questions about how Social Security fits in, we invite you to try our SS optimizer analysis to ensure you are getting the most of benefits that are rightfully yours. To schedule a meeting for additional support, reach out to us at (770) 249-7424, email Info@RichLifeAdvisors.com, or schedule an appointment to get started today.

About Beau

Beau Henderson is founder and visionary of RichLife Advisors, a locally owned and operated firm of retirement planning experts that focus on helping those approaching retirement create a comprehensive strategy to “live their definition of a RichLife.” Beau uses a holistic approach to financial planning, with the goal of improving his clients’ relationship with money while they live their unique definition of a fulfilled, meaningful retirement with purpose. He creates strategies his clients can understand, which provide financial comfort and confidence. Ongoing education and training is a top priority, and Beau strives to educate clients and make an impact as their trusted partner.

Beau has a psychology degree from the University of Georgia as well as the designations of Retirement Income Certified Professional (RICP®), Certification for Long-Term Care (CLTC®), National Social Security Advisor Certificate Holder, Certified Financial Fiduciary® , Certified Professional Retirement Coach (CPRC), Certified Bucket Plan Advisor, Master Certified Success Coach, and Certified Master Behavioral Analyst. He is also an active member of Ed Slott’s Elite IRA Advisor Group℠ (an organization dedicated to the ongoing education and mastery of the latest retirement tax laws) and a best-selling author. In his free time, Beau enjoys podcasting, traveling, boating, fishing, and spending time with his daughter, Gwendolyn. To learn more about Beau, connect with him on LinkedIn.