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Dear Liz, I retired in 2013 at the age of 55 years. I have an annuity that will earn me $ 1,000 a month for life for me and my wife. It starts in February 2020. In the meantime, my pension fund has been integrated into an IRA and I am getting about 10% a year. The balance is about $ 650,000.
My advisor wants me to start my social security at 62 years old. I would receive $ 1,800 a month and I could reduce my withdrawal rate to 4%. However, it was also said that it was better to wait until the age of retirement (66 and 6 months), or 70 years, at most. At the age of full retirement, my monthly benefit would be about $ 2,500, and at age 70, $ 3,000.
I do not know what to do. My wife will retire next year and her monthly pension will be about $ 3,700. We always have to our house and also have other debts. What is my best option?
Reply: Numerous researches have shown that single persons and "main employees" – the highest employee of a married couple – have an interest in delaying the start of their social security benefits. (The article "Understanding Social Security Claims Decisions with Evidence of Investigation" in the November 2018 issue of the Journal of Financial Planning sums up the research well.)
Longer life expectancies mean that most people will live beyond the breakeven point where the largest benefit largely outweighs the checks they spent in the early years. These big checks are also a kind of life insurance. The longer you live, the more likely you are to spend your other resources and find your income on social security.
It is particularly important for married couples to benefit from the waiting time of the main support, because at the time of the first death, the number of checks received by the household will increase from two to one. Since the survivor receives the larger of the two checks, it is generally wise to do so as large as possible.
The delays are so important – a study shows that the sustainable standard of living is 30% higher for people who start at age 66 instead of age 62 – that counselors often recommend to tap into other resources, including including pension funds, if this allows people to differ by starting their checks.
Your situation may be a bit different, because you mention that your wife has a pension. If the pension comes from a job that did not contribute to social security, its ability to receive survivor benefits from the social security system would be affected. The so-called government pension offset would reduce his survivor's check by two-thirds of his pension, which could completely eliminate his survivor benefits. If this is the case, it would not be as crucial as you delay.
Given the magnitude of the issues, you may want to seek the advice of another counselor, who can review the details of your situation.
Liz Weston, Chartered Financial Planner, is a personal finance columnist for NerdWallet. Questions can be sent to 3940 Laurel Canyon, # 238, Studio City, CA 91604, or using the "Contact" form at the address asklizweston.com. Distributed by No More Red Inc.
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