About the author: Lamar Watson, CFP®, is a Fee-Only Financial Advisor in the Washington, D.C. area that works with clients virtually across the country. Do you know how much you'll need to retire? If you work with Dream Financial Planning, we'll help you answer that question and evaluate the timing of your social security to maximize benefits. We’ll also discuss the optimal strategy of liquidating your retirement and brokerage accounts to replace your paycheck and sustain spending during retirement. Feel free to schedule a complimentary consultation to learn how we use the DREAM Financial Planning Process ™ to help our clients achieve their goals.
One of the most critical decisions you can make regarding your retirement is when you choose to claim Social Security. Deciding when to claim Social Security can make a difference in your monthly bottom line. If you're thinking about retirement, you should look at our Retirement Checklist below.
This checklist covers 32 of the most important planning issues to identify and consider for someone who is about to retire. It’s structured as follows:
- Cash Flow Issues
- Health Insurance Issues
- Asset & Debt Issues
- Tax Planning Issues
- Long-Term Planning Issues
- Other Issues
Before You Retire
Your monthly Social Security Benefit amount is calculated based on the number of years you have worked and the taxes you have paid into the Social Security Benefits program. Social Security counts the years you have paid taxes as “credits” for years that you have worked. For example, if you were born in 1929 or afterward, you must have 40 credits to receive Social Security benefits when you retire. This is equal to about 10 years of work.1
Your benefit amount is also calculated by the number of credits you have earned during your working years. Fortunately, the Social Security Administration has made it easier for you to verify your expected benefits by setting up an online account. It is worth double-checking your earnings to catch errors, if any, and factor in your expected benefits as you strategize for retirement.1
What Age Should You Claim?
There are several ages that should be considered when deciding when to claim Social Security.
- Early Retirement Age: The earliest age you can claim Social Security benefits is 62. However, if you claim Social Security early, you will be penalized for not waiting until the full retirement age.1,2
- Full Retirement Age: This is the age when you are eligible to receive the full amount of your Social Security benefits. The full retirement age is calculated based on the year you were born. For example, for those born between 1943 and 1954, the full retirement age was 66. If you were born between 1955 and 1960, the full retirement age goes up to 67.1,2
- Delayed Retirement Age: You can also delay the claim of your retirement benefits until age 70. If you wait until then, you will continue earning benefits. However, benefits stop accruing at age 70, so there may not be any reason to delay the claim of benefits past age 70.1,2
Deciding when to claim Social Security benefits is an important decision to make as you approach your retirement age. Talk with your financial advisor to make sure that you work together to decide the best time for you to apply for Social Security.
Dream Financial Planning Process ™
Do you know how much you need to retire? The DREAM Financial Planning Process™ for established professionals is tailored to the unique needs of those already retired or 15 years or less from their ideal retirement date. Since many established professionals are approaching retirement age, we wanted to create a more customized way of tending to your financial needs and goals. With this process, we're able to uncover untapped opportunities and discover gaps in your current strategy that could prevent you from enjoying a long and fulfilling retirement.
With uncertainty surrounding the economic stability of our country, it's okay to have fears and anxieties surrounding your own savings and investments. The most productive course of action from here is to reach out to Dream Financial Planning (or whoever your trusted advisor might be) and discuss your options. It's easy to have knee-jerk reactions when it feels like the bottom is falling out, but it is imperative to make decisions using research-backed data and a level head. If you'd like a Complimentary Review and risk assessment of your investment portfolio, feel free to send me an e-mail.
In the June Newsletter, I provide a market update and a PDF guide with tips to help you handle inflation. I also shared a CNN article where I shared my thoughts on Crypto and NFTs, 5 savings mistakes people make when building their financial life. If you find any of this information helpful, feel free to sign up to receive future e-mail updates. If you find any of this information helpful, feel free to sign up to receive future newsletters via e-mail.