Investing

Social Security’s Weird Provision Affects How Much You Get From Benefits, So Pay Attention

Austin Smith

Published: November 29, 2024 10:09 am

Key Points:

• The age you start claiming Social Security affects benefits greatly; waiting until 70 increases them while starting as early as 62 reduces payments
• When you start collecting benefits, personal elements including health, other income sources (e.g., pensions, IRAs), and financial needs need to play in to the math
• To maximize results, start planning for social security and related financial decisions—including IRA withdrawals-  by age 55.
• See if you’re ahead, or behind on retirement with this simple quiz. It’s free and takes 2 minutes. Click here to see where you stand (sponsor)

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Transcript:

[00:00:00] Doug: Social security has a weird provision. A lot of people don’t even know it’s there. And that is, yeah, people used to, I think some people think when you turn 65, you automatically get social security. It doesn’t occur to them until they get close to 65 that they’re options when it comes to your age.

[00:00:17] Doug: And it is a very difficult calculation to make. And it’s also partially a guess. So tell me, tell me how that works.

[00:00:24] Lee: Well, and number one, you have to apply for social security. It’s not something that comes in and just like, Hey, all of a sudden you have it. It’s there. So, and there’s max, there’s, there’s a multitude of times that you can do it.

[00:00:37] Lee: Now you can take it as early as 62, but the maximum benefit for, for people taking it at 62, which I did for instance, because I had ancillary income and some other ideas. And I thought, well, if I wait three years, I, I’m leaving a lot of money on the table. So the maximum that you can get at age 62 is $2,710 per month.

[00:01:00] Lee: Now if you wait till you are 65 years old, that’s gonna boost it up. The maximum benefit if, and that is if you take it between, at 65, your benefit’s gonna be 30. Or if you take it actually. At full retirement age up to 67, it’s $3,822 per month. Now , if you feel you’ve got a lot of dough and your time is, if you got plenty of time on the clock, then you can wait till you’re 70, and the maximum benefit is 4,000 $173 a month.

[00:01:37] Lee: And that’s, that’s pretty saucy. If you could wait that long. But a lot of people just plain and simple can’t wait that long.

[00:01:44] Doug: Yeah. If, if I’m somebody coming into that age group, if I’m in my late fifties, early sixties, there are two things I would look at the first one is how much money am I going to have coming in after I’ve retired?

[00:01:57] Doug: Right. Is it going to be because I’ve got a pension? Is it going to be because I have a lot of investments because I keep working? The other one though, is, is how healthy are you? I mean, one, one of the things that a lot of people take into account is if they’ve got a preexisting health condition that makes it likely that they may not live to be sort of the normal median lifespan of, of an American, which is probably 78 years, there are people who may simply just say that they, that they, they, they won’t do it.

[00:02:29] Doug: They want to wait.

[00:02:30] Lee: Yeah, you’re exactly right. You’re exactly right. And those are things that everybody, As you premised it with when you start to get into your late fifties, that’s, that’s an observation you have to make. Because remember, also, it’s the same thing with taking withdrawals from your IRA.

[00:02:46] Lee: I mean, at a certain point, you have to, but you can start taking them at 59 and a half. And so now those will be taxed. and you have to withhold a distribution from like your brokerage account sa out 4, 000. They will say how much do you want withheld for taxes, and felt like you can say none But maybe you can at some places but at most places it’s at least five or ten percent So but if you have a massive ira and that is adding to your passive income, then 62 may be a good idea

[00:03:21] Doug: Yeah, well again, I think as people I would not start to I wouldn’t go past age 55 When I and I wouldn’t wait after that and start to look at this

[00:03:33] Lee: No,

[00:03:33] Doug: I’d try to get out in front of it almost a decade if you can.