Number two, knowing your full retirement age and the impact of starting your Social Security income early or deciding to delay it. Full retirement age for most people is between 66 and 67. Delaying your benefit is actually the easiest way to increase your payment. Let’s say your full retirement age is 67; you can start taking your benefit as early as age 62, but this would reduce your monthly amount by almost 30%. For every year past age 67 that you wait, Social Security gives you an 8% annual increase in your benefit until age 70. There’s no additional benefit for waiting past 70.

Number three, pay attention to spousal benefits. Everyone’s entitled to their own benefit based on their own earnings record or half of their spouse’s benefit, whichever is higher. So, if you don’t have enough credits to qualify for your own benefit or your own benefit based on your own earnings record is less than 50% of your spouse’s benefit, you would file for the spousal benefit. You can also file for spousal benefits as early as age 62, but they would be reduced. However, unlike your own benefit, waiting past your full retirement age will not increase your spousal benefit. You may also be eligible for spousal benefits even if you’re divorced. As long as your marriage lasted at least 10 years and you’ve never remarried, you’re entitled to the same spousal benefits as if you were still married.

Number four, if applicable, apply for survivor’s benefits. When one spouse dies, the surviving spouse is entitled to the higher of their two benefits. This is an example of when waiting as long as possible to claim benefits, in the first place, can help. Unlike spousal benefits, which are based on the higher earning spouse’s full retirement age amount, survivor benefits are determined by the amount the higher earning spouse was actually receiving when they die.

Number five, pay attention to how much of your Social Security income is subject to federal taxation. Most likely you’ll pay federal tax on at least some of your Social Security income. The calculation of exactly how much is somewhat complicated, but it depends on how much other taxable income you have. So, you want to be strategic about the amount of non-social security income that you’re drawing. You may want to pull from a combination of your traditional IRA and Roth accounts in order to have some control over how much of your Social Security income is actually going to subject to federal tax.

Just a few other things to note.  If you do start taking your Social Security benefits and you decide within 12 months that it was too early, you can actually undo your claim. You would basically pay back benefits that you received to date and then you could start over at a later date and take advantage of being eligible for the higher amount that you would’ve gotten if you had waited to begin with. If you decide that you took your benefits too early, but it’s been past 12 months you can actually suspend your benefit. You stop getting payments from that point forward and then you can restart them at a later date, and you still get the 8% increase in between suspending your benefits and when you restart them.

The last thing I want to say is, check your Social Security statements, check your earnings record, and make sure that they’re accurate. Mistakes get made sometimes in reporting and they can impact your future benefit. If you look at your earnings record and you see any mistakes you want to notify the Social Security administration.

Really, understanding how things work and implementing some simple strategies can really help you get the most out of your Social Security income in retirement.

IMPORTANT DISCLOSURES:

• Investment Advisory and Financial Planning Services are offered through Pure Financial Advisors, LLC, a Registered Investment Advisor.

• Pure Financial Advisors LLC does not offer tax or legal advice. Consult with your tax advisor or attorney regarding specific situations.

• Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

• Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

• All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy.

• Intended for educational purposes only and are not intended as individualized advice or a guarantee that you will achieve a desired result. Before implementing any strategies discussed you should consult your tax and financial advisors.

CFP® – The CERTIFIED FINANCIAL PLANNER certification is by the Certified Financial Planner Board of Standards, Inc. To attain the right to use the CFP® designation, an individual must satisfactorily fulfill education, experience and ethics requirements as well as pass a comprehensive exam. Thirty hours of continuing education is required every two years to maintain the designation.

AIF® – Accredited Investment Fiduciary designation is administered by the Center for Fiduciary Studies fi360. To receive the AIF Designation, an individual must meet prerequisite criteria, complete a training program, and pass a comprehensive examination. Six hours of continuing education is required annually to maintain the designation.

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1. Importance of Timing Social Security Benefits
Choosing when to take Social Security benefits is more than just picking a retirement date—it’s a decision that affects your financial security for years. The amount you receive is influenced by your retirement age and life expectancy, making it essential to align the timing with your personal and financial goals.

2. Understanding Social Security Benefits
Most individuals draw Social Security benefits based on their work record. Other types of benefits include:

• Spousal Benefits: Equal to 50% of a spouse’s benefit.
• Survivor Benefits: Equal to 100% of a deceased spouse’s benefit.
• Disability Benefits: Available for those with qualifying disabilities.
  This guide focuses on retirement benefits, the most common type of Social Security payout.

3. Full Retirement Age Calculation
Your full retirement age (FRA) depends on your birth year.

• For those born between 1943–1954, FRA is 66 years.
• For those born after 1954, FRA increases by two months per year until it reaches 67 for individuals born in 1960 or later.
  For example, someone born on January 17, 1959, has an FRA of 66 years and 10 months, making it September 1, 2026.

4. Monthly Benefit Amounts
The average monthly Social Security benefit varies by gender:

• For men retiring at FRA (67): $2,900
• For women retiring at FRA: $1,700
  For calculation purposes, a midpoint of $2,300 is often used to represent average benefits.

5. Impact of Early and Delayed Retirement
The age at which you start taking Social Security benefits has a significant impact on your monthly payments:

• Early Retirement (62): Results in a 30% reduction, yielding $1,610 per month.
• Full Retirement Age (67): Yields the full benefit of $2,300 per month.
• Delayed Retirement (70): Results in a 24% increase, yielding $2,850 per month.
  Your decision should be guided by your life expectancy and immediate financial needs.

6. Lifetime Benefits Based on Life Expectancy
Lifetime benefits can vary significantly based on when you start taking Social Security and how long you live. For example, if you pass away at 82:

• Taking benefits at 62 results in $386,500.
• Taking benefits at 67 results in $414,000.
• Taking benefits at 70 results in $410,400.
  This shows that waiting until FRA (67) is the most beneficial if life expectancy is 82.

7. Benefits for Different Life Expectancies
As life expectancy increases, delaying benefits becomes more advantageous:

• Passing away at 85:
  • Benefits at 62: $444,360
  • Benefits at 67: $496,800
  • Benefits at 70: $513,000
• Passing away at 90:
  • Benefits at 62: $540,000
  • Benefits at 67: $624,000
  • Benefits at 70: $684,000
    Longer life expectancy makes delaying benefits until 70 the most financially rewarding choice.

8. Personal Considerations and Spousal Impact
For married couples, the decision to delay benefits often involves considering the financial impact on the surviving spouse. If one spouse has a lower Social Security benefit, delaying the higher-earning spouse’s benefits until 70 can maximize survivor benefits, providing more financial security for the surviving spouse.

9. Conclusion and Recommendations
The best age to take Social Security benefits depends on your individual circumstances, including life expectancy, financial needs, and spousal considerations. Delaying benefits can provide higher monthly and lifetime benefits for those with longer life expectancies and additional income sources.

Making an informed decision is key to maximizing your Social Security benefits. Take the time to evaluate your options and consult with a financial advisor if needed to ensure your choice aligns with your retirement goals.

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Here’s how singles across different generations can take action to maximize their retirement success, focusing on strategic savings, Social Security benefits, and asset allocation.

1. Retirement Planning Strategies for Different Generations

Each generation has different priorities and financial strategies to consider. Here’s a breakdown of key strategies for Millennials, Generation X, and Baby Boomers to help you focus on what matters most at your stage of life.

• Millennials (Ages 25-40): For those in their 20s and 30s, the priority should be budgeting and debt management. Building a strong financial foundation early on can make a huge difference in your retirement savings down the road. Start by contributing to retirement accounts like 401(k)s or IRAs, even if the contributions are modest at first. The power of compound interest means the earlier you start, the more your money will grow. Avoiding high-interest debt and creating a solid budget will give you the freedom to increase your retirement contributions over time.
• Generation X (Ages 41-56): Generation X is in a critical period for retirement planning. At this stage, it’s important to focus on building an emergency fund to cover 3-6 months of expenses and maximizing retirement account contributions. You’re likely in your peak earning years, so it’s crucial to make the most of employer matches and catch-up contributions for 401(k)s and IRAs, which allow you to contribute more as you approach retirement. Reassess your overall retirement strategy to ensure you’re on track for a comfortable retirement.
• Baby Boomers (Ages 57-75): As Baby Boomers near retirement, the focus should shift toward Social Security strategies, catch-up contributions, and adjusting asset allocation to reduce risk. At this stage, it’s crucial to make sure you’re maximizing your Social Security benefits, considering the optimal time to claim them, and reviewing your asset allocation to ensure you’re not taking on unnecessary risk. The goal is to ensure a steady income stream and protect your wealth as you transition into retirement.

2. Maximizing Retirement Accounts

One of the most effective ways to build wealth for retirement is by maximizing your retirement account contributions. Whether it’s a 401(k), IRA, or Roth IRA, these accounts offer tax advantages that can help you grow your retirement savings faster.

• For Millennials, starting to contribute to retirement accounts as early as possible can set you up for long-term financial success. Even small contributions can grow substantially over time due to the power of compound interest.
• Generation X should focus on maxing out contributions to 401(k)s and IRAs. If you’re not already doing so, try to take full advantage of your employer’s match, which is essentially free money for your retirement. Additionally, consider making catch-up contributions to your retirement accounts, which are allowed once you hit 50, to help make up for any lost time or missed contributions.
• For Baby Boomers, maximizing contributions to retirement accounts becomes increasingly important as you approach retirement. If you haven’t yet reached your contribution limits, this is a crucial time to catch up and boost your retirement savings.

It’s important to note that inflation and market downturns can impact your retirement savings, so taking advantage of these contributions while you can is key to offsetting those risks.

3. Understanding Social Security Benefits and Strategies

Social Security can play a significant role in your retirement income, but understanding how to make the most of it is essential. Whether you’re planning to claim early or delay your benefits, timing your Social Security benefits can make a huge difference in your long-term income.

• Millennials: While Social Security may seem far off, it’s important to understand the long-term implications of early claiming versus delaying your benefits. Delaying benefits can increase your monthly payout, while claiming early can reduce your monthly check for life.
• Generation X: You’re likely at the age where planning for spousal benefits (if applicable) and understanding the pros and cons of early or delayed claims should be part of your retirement strategy. Additionally, don’t overlook ex-spouse benefits if you were previously married for 10+ years, as you may be eligible for benefits based on their earnings.
• Baby Boomers: At this stage, it’s important to determine the optimal time to start receiving Social Security benefits, considering your other retirement income sources. Delaying benefits up to age 70 can significantly increase your monthly payout, but you must weigh that decision with your other income sources and life expectancy.

For singles, disability insurance is also something to consider. Having a backup plan in case of an unexpected health issue or early retirement is important to ensure your financial stability.

4. Importance of Asset Allocation and Risk Management

Proper asset allocation and risk management are crucial components of a successful retirement plan. As you get closer to retirement, you’ll want to adjust your portfolio to reduce exposure to risk, especially as the market fluctuates.

• Millennials: At this stage, you can afford to take on more risk, as you have time on your side to recover from market downturns. The focus should be on growth assets (stocks, mutual funds, etc.), but it’s important to regularly review your portfolio to make sure you’re on track.
• Generation X: For those in their 40s and 50s, balancing growth with preservation becomes essential. Having a diversified portfolio of stocks, bonds, and real estate is key to maintaining a balance between risk and reward. Additionally, consider adding life insurance or disability insurance for extra security in case you can no longer work.
• Baby Boomers: As you near or enter retirement, you may want to shift to more conservative investments, focusing on income-producing assets such as bonds or dividend-paying stocks. This will help minimize risk and provide a steady income during retirement. Regular rebalancing is also essential to adjust your portfolio based on changing market conditions.

Next Steps for Retirement Planning

• Millennials: Focus on budgeting, debt management, and starting to contribute to retirement accounts like 401(k)s and IRAs.
• Generation X: Prioritize building an emergency fund, maxing out contributions to retirement accounts, and reassessing your overall strategy.
• Baby Boomers: Focus on Social Security strategies, catch-up contributions, and reviewing your asset allocation to reduce risk as you approach retirement.

IMPORTANT DISCLOSURES:

• Investment Advisory and Financial Planning Services are offered through Pure Financial Advisors, LLC. A Registered Investment Advisor.

• Pure Financial Advisors, LLC. does not offer tax or legal advice. Consult with a tax advisor or attorney regarding specific situations.

• Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

• Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

• All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. • Intended for educational purposes only and are not intended as individualized advice or a guarantee that you will achieve a desired result. Before implementing any strategies discussed you should consult your tax and financial advisors

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1. Social Security Benefits Calculation

Social Security benefits are designed to provide financial support during retirement, but how much you receive depends on your earnings history. Here’s how your benefit amount is calculated:

• Top 35 Years of Earnings: Social Security benefits are based on your top 35 years of earnings, adjusted for inflation. These years are used to determine your average indexed monthly earnings (AIME). If you don’t have 35 years of work history, the remaining years are counted as zeroes.
• AIME and Bend Points: After calculating your AIME, the bend points are applied to determine the amount of your monthly benefits. Bend points are specific thresholds that apply to different portions of your AIME. The formula used to calculate Social Security benefits is progressive, meaning that lower earnings are replaced at a higher percentage than higher earnings. The formula is designed to provide a greater replacement rate for those with lower lifetime earnings.
• Benefit at Full Retirement Age (FRA): Your primary insurance amount (PIA) is based on your AIME, and this amount represents the full Social Security benefit you’re eligible for if you start claiming benefits at your full retirement age (FRA). The earlier you claim benefits, the lower your monthly payments will be, but waiting can increase your monthly benefit.

2. Full Retirement Age Determination

Full retirement age (FRA) is the age at which you can begin receiving full Social Security benefits without any reductions. The FRA depends on your year of birth:

• FRA for Different Birth Years: For those born in 1937 or earlier, the FRA is 65. For those born between 1938 and 1959, the FRA gradually increases from 65 to 66 years. For individuals born in 1960 or later, the FRA is 67.
• Impact on Social Security Benefits: If you claim benefits before your FRA, your monthly benefit will be reduced by a certain percentage for each month you claim early. Conversely, if you delay claiming benefits past your FRA (up until age 70), your benefit will increase by 8% per year, giving you a larger monthly payment.
• Penalty for Early Work While Claiming Social Security: If you start receiving Social Security benefits before your FRA and continue working, your benefits may be reduced due to the earnings test. This test limits how much you can earn before your benefits are reduced, depending on your income level.

3. Consequences of Earnings Test

The earnings test applies to individuals who are receiving Social Security benefits before reaching full retirement age and continue to work. Here’s how it works:

• Income Limits: If you’re under FRA and earning above a certain threshold, Social Security will withhold $1 in benefits for every $2 you earn above the limit. The earnings limit varies based on the year and is typically adjusted annually for inflation.
• Higher Threshold for Full Retirement Age: Once you reach full retirement age, the earnings test no longer applies. This means you can work as much as you want without having your Social Security benefits reduced. This provides flexibility for those who may want to continue working or transition to part-time work during retirement.
• Considerations for Early Claiming: While claiming Social Security early can provide immediate income, the earnings test is an important consideration. If you plan to work in retirement, it may make sense to delay claiming Social Security until you’re eligible for your full benefit to maximize your monthly payout.

4. Comparison of Medicare Options

When it comes to healthcare coverage in retirement, Medicare is the primary option for individuals aged 65 and older. However, there are several different paths you can take within the Medicare system:

• Medicare Part A and Part B: Original Medicare consists of Part A (hospital insurance) and Part B (medical insurance). Part A is generally free if you’ve paid Medicare taxes during your working years, while Part B requires a monthly premium. However, Original Medicare does not cover all healthcare expenses, such as vision, dental, and prescription drugs, which is where additional coverage comes into play.
• Medicare Advantage Plans (Part C): Medicare Advantage plans are offered by private insurance companies and include all the benefits of Parts A and B, and often Part D (prescription drug coverage). Some Medicare Advantage plans offer additional coverage, such as dental, vision, and hearing benefits. These plans can offer lower premiums than Original Medicare, but they typically come with network restrictions, meaning you must use doctors and hospitals within the plan’s network. Additionally, pre-authorization may be required for some services.
• Medicare Supplemental Plans (Medigap): If you choose Original Medicare, you may want to consider a Medicare Supplemental plan (also known as Medigap). These plans help cover the out-of-pocket costs that Original Medicare doesn’t, including copayments, coinsurance, and deductibles. Plan G and Plan N are the most popular Medigap plans, with Plan G covering nearly all out-of-pocket expenses, except for the Part B deductible.
• Prescription Drug Coverage (Part D): Whether you choose Original Medicare or a Medicare Advantage plan, you’ll likely need a Part D plan for prescription drug coverage. Part D plans are offered by private insurers and can significantly reduce the cost of medications. Without Part D coverage, prescription drug costs can become a major financial burden in retirement.

Conclusion: Make Informed Decisions for a Secure Retirement

Social Security benefits, retirement age, and Medicare options are central to your financial planning in retirement. By understanding how your benefits are calculated, the impact of your earnings test, and the differences between Medicare options, you can make informed decisions that maximize your benefits and healthcare coverage.

Carefully consider when to begin claiming Social Security benefits, whether to choose Original Medicare or Medicare Advantage, and how to add Part D or Medigap coverage to ensure comprehensive healthcare protection. With the right planning, you can secure a comfortable and financially stable retirement.

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