Should You Delay Drawing Social Security?

By Ray and Dana Brandon

Ray’s Take Persistent high unemployment and more than a decade of volatile stock markets have many people anxious to draw Social Security as early as possible even if they are shy of full retirement age. Some are so anxious about the system they want to get what they can before it goes bust. No one has a crystal ball, but more often than not, this is not the best plan.

If you plan to still work at age 62, 64 or beyond, it can work against you to draw payments during those years. These would likely be your highest income years, able to boost payments later if you’re not drawing now. Plus, you will pay taxes on part of your Social Security payments, so it’s a double loss.

Beyond that, there are myriad things to consider when deciding when to file for Social Security: Do you need the money now? How much have you saved for retirement? How about spousal benefits? Should you file early but defer payments? Should one spouse get payments while the other waits? How would payments affect the spouse who lives longest?

Remember, annual cost-of-living adjustments that raise monthly benefits are a percentage of those payments – the lower the payments you start with, the smaller the increases. Longevity risk is a much greater concern for most people than they realize. Now that corporate pensions have given way to 401(k) accounts and the like, Social Security’s lifetime income stream with inflation adjustments is a significant resource.

It’s a very complicated decision and requires long and careful consideration. You can find some help at the Social Security Administration’s website, though the many options presented might confuse you even more.

This is one time when the help of a trusted financial advisor or personal accountant could be invaluable. You need an informed decision, because you have only 12 months to change your mind, and the rest of your life to live with the decision you’ve made.

Dana’s Take Baby Boomers may experience the double whammy of not drawing the Social Security promised plus living far longer than imagined. Our other challenge will be downshifting from an inflated lifestyle to a more modest one.

Seniors today lived through the Great Depression and appreciate how to conserve resources. Today’s generation of supersized spenders will have to work hard to transition into “making something out of nothing.”

Ray advises newly married couples to start living on one income to prepare for the day when they might need to live on one income. Those of us approaching retirement age could practice living on a slashed income.

Start planning today for how to live smaller for longer. Would that mean a home with one bathroom instead of four? Perhaps the savings you realize now can be socked away for those golden years.

Ray Brandon is a certified financial planner and CEO of Brandon Financial Planning (www.brandonplanning.com). His wife, Dana, has a bachelor’s degree in finance and is a licensed clinical social worker. Contact Ray Brandon at raybrandon@brandonplanning.com.