Noozhawk’s note: First in a series of Social Security-related columns by Ameriflex representatives. Click here for a related article.]
Q. Will Social Security benefits be available for me?
A. Social Security’s troubles are a hot topic in the media. As the baby-boom generation nears retirement age, Social Security is getting ever closer to negative cash flow, meaning there will be more people taking payouts from the system than there are workers paying in. The turning point will probably occur in 2016 or 2017.
However, the Social Security Administration reports that the current schedule of benefits will be payable up until 2041, even if nothing is done to amend the system. The SSA reports that beyond 2041, benefits will still be payable, only reduced by 22 percent — further reductions would occur in subsequent years. As a result, it’s important to consider the impact Social Security will have on your retirement plans.
Q. When should I apply for benefits with Social Security?
A. One of the most important decisions a retiree faces is when to apply for Social Security benefits. This is not a decision to be made lightly; the guaranteed lifetime inflation-adjusted income promised by Social Security makes it one of a retiree’s most significant assets.
If you were to calculate the present value of a client’s Social Security income stream, it would rival the lump sum many people have in their 401(k) plans at retirement. While the Social Security “asset” may not be managed in the traditional way, pre-retirees can enhance its value by building a strong earnings record and applying for benefits at the optimal time.
The basic choices for applying for Social Security are these:
» Apply at age 62 and receive a reduced benefit for life
» Apply at full retirement age and receive full benefits for life
» Apply at age 70 and receive an additional credit for life
— Justin Anderson, CFP, CRC, CLU, is a financial planner and Bibi Taylor, MBA, is the Social Security project coordinator at AmeriFlex, 3700 State St., Suite 310, in Santa Barbara. Call 805.898.0893 for more information. Financial advisors and registered representatives associated with AmeriFlex Financial Services offer securities and advisory services through SagePoint Financial Inc., member FINRA/SIPC. Insurance services offered through AmeriFlex Financial Services, which is not affiliated with SagePoint Financial Inc. or registered as a broker-dealer or investment advisor. Registered representatives may only discuss and/or transact securities business with residents of the following states: AR, AZ, CA, CO, FL, GA, IL, IN, MI, MO, NC, ND, NJ, NM, NV, NY, OH, OR, PA, PR, SC, TX, VA, WA, WI.