4 Outcomes to Help You Determine When to Take Social Security

As we get closer to retirement, one of the most important decisions we're going to have to make is when we're planning on taking Social security. So today I want to talk about four retirement outcomes that might help you frame how and when you might want to take your social Security. But first I want to introduce myself. My name is Warren Burger. I'm the owner of Luminary Financial Advisors, and we help guide people through retirement with an emphasis on saving money on taxes. So social security is one of the most important assets we have in our retirement. It's inflation adjusted it's government backed, and so it ultimately helps to mitigate some of the risks that we have in retirement, such as longevity risk, that risk that we're going to outlive our assets in retirement. It also mitigates market risk, right? We're not, we don't have to be as concerned with our assets that we have invested in the market if we have this guaranteed money coming in.

And also inflation risk because it's inflation adjusted, it helps to mitigate that risk as we move through retirement through its ability to mitigate risks. We can look at social security as akin to being an insurance policy for our retirement plan. Now, we can elect to start getting social security at age 62. But with that, you would be taking a permanent reduction in benefits of approximately 30%, and that lasts your whole lifetime. Then you can wait up until full retirement age, and then you, if you go further than that, up to age 70, you get an increase in benefits of about 8% each year that you delay past your full retirement age. So we have this spectrum of time that we can elect to choose when we start collecting social Security, and it leads us to, to try to get a framework on how we want to be thinking about what would be the most beneficial way to do this.

So when it comes to electing whether or not we want to take Social security early or later, there's really four outcomes that we can look at, and it's based on when we're going to be claiming early or late and the length of our retirement. Are we going to have a short retirement or a long retirement? And we can look at the outcomes of those scenarios and start to get a basis from which we can make a decision. So what happens if we elect to claim early? Well, there's two possible combinations that could happen. Either we're going to have a shorter retirement or a longer retirement. If we claim early and we have a shorter retirement, well then we made out, we, we were able to get the most benefit that we could for Social security. But unfortunately, we ended up having a shorter retirement. We're able to access the most amount of money from our social security benefit that we could in that scenario.

Now, if we were to claim early and we have a longer retirement, while we've now taking a permanent reduction in benefit over the course of our whole lifetime, it's not an Optum outcome. For that longer retirement scenario. If we were to claim later and have a shorter retirement of course we wouldn't be getting the same amount of benefit that we could have. Alternatively but in terms of the harm it does for our retirement, it's minimal because we've ended up, because it was an early retirement, we put less pressure on our invested resources. And so the people that are left over are beneficiaries

Stand to, to gain more money. And at that point, your retirement has ended, and we're really talking about the legacy that you're leaving behind. Now, if you claim later and you have a long retirement, well that ends up being the best outcome because now you have permanently increased your lifestyle over the course of your longer retirement. You've mitigated that risk that you're going to outlive your assets. Of course, it's awful to be in a situation where retirement was cut short. But when you look at the totality of the situation with regard to your retirement and social security as an, as an insurance vehicle, you really seeing that in the, in the, in the scope of these situations, three, outta these four situations lead to a better or a minimal cost to your retirement and regret about when you claim social security doesn't exist after you die.

So, you know, my mindset when I look at this is what is going to be the best for both me and my survivors? And you have to factor in that there is a survivor benefit that's included. And the longer you wait, the higher your benefit is going to be, and also the higher your survivor benefit is going to be. So it's just another fact that to consider all things being said, everyone's situation is different. Obviously, you have to apply this to what is right for you. But in many situations we find you are just creating a bigger safety net. Now, there are a couple of reasons why you might want to take Social Security earlier. And you know, two of the main ones that I see are that you need the money. You're at a point that you have to retire, you can't wait any longer, or it's just time for you to retire and it's time, and you, and you need that money in order to live the life that you want to live perfectly appropriate.

And also, if you have a medical condition that may signify that you would have a shorter retirement, another another thing that you want to be looking at, but I would just caution you to not arbitrarily make that decision. That should be in conjunction with a doctor and a doctor being able to say you have these mitigating factors. Because once again, we don't want to take the chance that you're going to outlive your resources in retirement. So I hope this has been helpful. If you look in the comment section below, I have links to some flow charts and checklists that I think are really helpful for people that are approaching retirement. And if you want to have a conversation with me about your personal financial situation, I have a link to my personal calendar below. You can schedule for a complimentary meeting. So thanks for watching and we'll see you next time.