Harless Tax Blog

Harless Tax Blog

Spouses Need To Think Carefully About When To Take Social Security Benefits

Tuesday, August 14, 2018

Source from fa-mag.com
When a spouse starts receiving his Social Security benefits can determine the lifetime income his or her surviving partner will get, according to Diane Pearson, a wealth advisor and shareholder at Legend Financial Advisors in Pittsburgh.

Social Security makes up an average of 40 percent of people’s retirement income and “is more valuable than most people think,” said Pearson during a webinar Wednesday sponsored by Legend Financial entitled “Social Security Planning: What You Need To Know To Maximize Retirement Income.”

A benefit of $2,000 a month for a 30-year retirement with a 2.1 percent cost of living adjustment (COLA) is $1.122 million, Pearson said. But how much a beneficiary will receive can vary.

One of the first questions everyone asks about Social Security is: Will it be there in the future? Pearson said yes. The $2.9 trillion Social Security Trust Fund is enough money to pay 100 percent of the benefits due to retirees through 2034, at which point benefits will be reduced to 77 percent of what is due unless changes are made.

To solve the problem, the retirement age could be raised, the amount of income on which Social Security taxes are paid could be raised, the COLA could be reduced or the benefits as a whole could be reduced.

A spouse is entitled, for the most part, to an amount equal to half of the higher earner’s benefits. Once the spouse dies, the survivor is entitled to 100 percent of the deceased person’s benefit. So it pays to maximize the higher earner’s benefit, which usually means he or she should wait as long as possible, up to age 70, to begin taking the benefit, Pearson said.

If both the husband and wife were receiving benefits before one passes away, the survivor will have to budget for the loss of one check, Pearson added.

When a person applies for benefits can mean thousands of dollars in added income over a long retirement.


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