Earlier this year, as I looked more and more into the challenges and prospects for soon-to-be retirees - the two-thirds of us who do not have huge nest eggs - I discovered that Social Security benefits will be the critical component of our retirement finances. The past six months I have dug deeply into this program - the largest single financial program operated by the federal government.
I learned how deceptively complex Social Security is. I mean, I just go down to your local office, sign up, and receive a monthly check for the rest of your life, right? (Or, skip the trip to the local office and sign up online in minutes.) What could be simpler?
As you surely know by now, I can start my benefits any time between the ages of 62 and 70, and therein lies the complexity: when I start can make a huge difference in my cumulative lifetime benefits, depending on how long I live. For married couples - I fit in that category - the complexity multiples because of rules governing spousal benefits and survivors. It turns out that the simple decision to sign up can cost me a lot - easily over a $100,000 - if I get the timing wrong. And, what's true for me is true for you.
So, I created a new online analysis tool to share some of the insights I gained in my research with you. I also created a Social Security Alternatives Report that provides you an in depth analysis of how your claiming age affects your cumulative lifetime benefits in order to determine the claiming age that best serves you and your spouse. (I also have a beta version available of this report for singles; versions for divorcees and widow/widowers are coming soon.)
For those of us in our fifties and sixties, there is little time for the miracle of compound interest to work on our financial nest eggs, battered as they have been in the financial crisis. Social Security benefits, by contrast, offer us one area where we can control part of our financial future, especially by letting the amount of these benefits grow by delaying claiming them. Inflation-adjusted, not subject to the gyrations of the financial markets, and guaranteed by the federal government, Social Security is one terrific program. Future posts will continue for the time being to focus on Social Security and how you can use it to your lifelong benefit.
