The Power of Social Security Planning

If you understand it, Social Security can be a powerful part of your retirement plan.  At Virtus Wealth Management, we give Social Security the respect that it deserves.  It’s not one size fits all.  The timing of social security is specific to each of our clients’ individual plans and needs.  Here are some key items that we consider when harnessing the power of social security for our clients.

Social Security is a Financial Asset

We don’t just look at the monthly social security benefit.  We consider it a larger lifetime asset.  With rising life expectancy, our clients could be collecting Social Security for 25-30 years.  This is significant!  Consider that the average Social Security benefit is $1,666 per month which is close to $20,000 annually.  This doesn’t seem like much, but when you extrapolate that out over 25 years, it totals almost $500,000 and, remember, the benefit is adjusted for inflation on top of that.  Social Security is a Financial Asset.

Maximize the Survivor Benefit

We believe married couples should have a coordinated claiming strategy, and survivor benefits are the key reason.  When a spouse dies, the survivor is entitled to receive the greater of her own benefit or up to 100% of the spouse’s benefit, including any cost-of-living increases earned along the way. Maximizing the survivor benefit can be an especially important consideration for women. Men not only tend to be the higher wage earners but also generally die at younger ages than women. In many cases, a delayed filing by a man can be a critical way to boost lifetime retirement security for older women—a time of life when savings may be diminished.  All in all, couples have a range of options. But, most often, couples will benefit if the higher-benefit spouse delays filing to earn delayed credits. A coordinated delay strategy increases the odds that lifetime benefits will be greater.

Minimize the Tax

More than half of Social Security beneficiaries pay income taxes on some part of their benefits. The formula used to calculate the portion of Social Security benefits is unique.  The bottom line is that zero of your social security income can be taxed, up to 50% of your social security income can be taxed, or up to 85% of your social security benefits can be taxed.  Our goal is to plan ahead and attempt to keep our clients out of the “up to 85%” category as long as possible.  This may be by building a post-tax account for income to supplement social security before taking income from their tax deferred accounts.  This may be by building a Roth IRA to strategically use accordingly.

These are just a few items to consider.  There are more complicated aspects like the Earnings Test for clients who claim benefits while continuing to work and the Windfall Elimination Provision (WEP) / Government Pension Offset (GPO) that affect clients who participated in public-sector pension plans.

At Virtus Wealth Management, we partner with and educate our clients to help them make informed decisions so they can plan accordingly and get the most out of the benefits available to them.  This includes the power of Social Security.  We are here to help!