Should This Client Claim Social Security Before 70?
However, this last year with the market downturn, along with rising inflation, has put pressure on their portfolio.
Furthermore, much has changed in the last 12 years. Most notably, they now have grandchildren and their top goal has changed significantly. They want to secure a larger inheritance than originally planned.
Weighing The Options
If the clients wait to claim for four more years, they will continue to chew through their portfolio. Even if there is a sustained a market rally, the new goals must be factored in.
The question, therefore, becomes, “Shouldn’t they claim now?”
There are some small trade-offs. Assuming a January claim date, Juan Carlos will only get a 6-month bump, and Tessa will take an 8% reduction for claiming early.
Together, they will bring in about $4,500 per month from Social Security. Medicare Part B premiums will reduce benefits to about $4,100. That’s an annual income of roughly $50,000.
Claiming sooner allows them to reduce their portfolio draw by $200,000 between now and age 70. Assuming a 7% investment return, that’s over $1 million more in the portfolio for their legacy.
Connect the Dots on the Family Side of the Equation, Too
When the advisor connected all the current dots — market downturns, high inflation, and his clients’ new top goal — the question about when to claim became much more than about 8% delayed retirement credits.
When planning for retirement accumulation, advisors are adept at connecting dots on the financial side. But when it comes to retirement income, it’s critical to connect dots on the family side of the equation as well.
When considering family legacy and inheritance goals, Social Security cannot be bequeathed. Only personal assets can pass to the younger generation.
Juan Carlos and Tessa decided to claim in January. They would rather start Social Security now, preserve more of their personal assets, and meet their most important family goals of the future.
Marcia Mantell is the founder and president of Mantell Retirement Consulting Inc., a retirement business development, marketing & communications, and education company supporting the financial services industry, advisors, and their clients. She is author of “What’s the Deal with Retirement Planning for Women?,” “What’s the Deal with Social Security for Women?” and blogs at BoomerRetirementBriefs.com.
