This one Social Security mistake is costing the average household $111,000.00!
Only 4% of retirees claim Social Security at the most "financially optimal time." That means the remaining 96% are missing out on $3.4 trillion dollars, which averages out to just over $100,000.00 for most families!
Yes, you can claim Social Security benefits starting at age 62, but that doesn't mean you should. As Ryan explains to Erin, your benefits grow each year, by as much as 8% the longer you wait.
But to figure out when you should claim, you need to take many factors into account including life expectancy, your family health history, and exactly what you'll need to live on in retirement.
Erin: Ryan, good to see you. Today we are talking about the social security mistake. I was surprised to recently learn that only 4% of retirees claim social security at the most financially optimal time. So the remaining 96% of retirees are losing out on $3.4 trillion, which comes out to $111,000 per household. Of course, claiming is complicated. You need to take a lot of factors into account, but what should people be keeping in mind when they're trying to figure out when to take those benefits?
Ryan: Well, there's a lot of things to consider. First off, you can take your benefit anytime between the age of 62 and 70. The longer you wait, the higher your benefit's going to be. That doesn't necessarily mean that you should delay when you take your social security benefit, but you do need to be aware of that. And then also, you have to be aware of all the different benefits that you may be entitled to. That could include a spousal benefit, a survivor benefit, maybe a divorce spouse benefit, because you really want to make sure that you're doing everything that you can to get the most that you can get from the Social Security system.
Erin: Right. Now, let's touch on the other big headline that we learned of last year, which was the significant increase in the COLA, the Cost of Living Adjustment. How do we take this into account, because this is really big news?
Ryan: This is. I mean, this is a very welcome thing that happened, because over the last several years, we've seen a few years here where we didn't get any cost of living adjustments at all. But last year, inflation really picked up quite a bit, and so as a result that the new cost of living adjustment here in 2023 went up 8.7%, so that's definitely a nice thing,
Erin: Right. Okay, so listen to this too. Apparently only 42% of people have ever calculated what they'll need to live on in retirement. Should that be our first step though?
Ryan: A 100%. Yeah, absolutely. Before retiring, you need to know exactly what you need to live on. And I always say that putting together a budget, is about as fun to do as is getting a root canal. Nobody likes to do it. And quite frankly, in your working years, if you're doing pretty well, if you're saving and investing and you've got plenty of extra money going on, the need to really need to put together a budget isn't that important. But when you get to that point where you're going to retire and you have to depend upon everything you've accumulated so far, the different income sources you have available to you, it's absolutely imperative to know how much you're going to need to spend over the next several years of your retirement.
Erin: So let's say that I've now realized though, that I claimed too early, am I out of luck?
Ryan: Not necessarily. You do get one do over, and as long as you pay back all the benefits that you received and all the benefits that were paid out on your earnings record, like any spousal benefits within 12 months, then you do get that one due over. But you really need to consider, especially if you're closer to that 12 month period, whether it's going to make sense for you to be able to pay back that full amount, and really whether you can afford to do so depending upon your situation.
Erin: Well, Ryan, I like being able to talk this through, because it is so much more complicated than just plugging in your age or plugging in some other variable. This really requires a conversation with a professional. So if somebody would like to have that conversation with you, what's the best way to get ahold of you?
Ryan: Well, one way is just to give me a call, 714 462 9155. Again, 714 462 9155. Could also reach out on the website, which is cravitzfinancial.com. Just go to the contact page there and send a message.
Erin: All right, Ryan, thank you.
Ryan: Thank you.