What to sift in Social Security decision
WASHINGTON — A large part of retirement planning involves guesswork.
And I, for one, am stressed about whether I’m guessing right.
Take Social Security. Experts advise waiting as long as possible, until 70 if you can, to start collecting your benefits. Do this, and you’ll get more money. This choice makes sense if you guess correctly and live into your 90s. But what if you don’t live that long? You’ll leave significant money on the table. When you pay into a system your entire working career, the possibility of not collecting what you put in leaves you feeling cheated.
Because the elderly today are living longer, Social Security checks can make a world of difference. Health care is often the biggest expense on a senior’s budget, and even the best insurance plan can leave a gap. Should you become medically incapacitated and unable to feed yourself, bathe or do other normal activities of life, you’ll need help. You might be blessed enough to have children who can pitch in, but at some point, they might need help assisting you. Seeing the cost of a nursing home, assisted-living facility or long-term care aide is enough to make you feel like you’ve been punched in the gut.
This is the reality of growing old in America.
So, to try to make sure you have enough money to stretch throughout retirement, you have to guess if you’re going to get sick enough to need long term care. You have to guess when you’re going to die.
In my weekly Washington Post newsletter, I recently mentioned a discussion that my husband and I have been having about when to take benefits. I want to wait. He wants to collect early, saying we could use the money to do more when we’re healthier and more energetic.
Upon reading about our debate, Washington Post financial columnist Allan Sloan wrote to me. He’s a brilliant guy, and I trust his advice.
“Unless you or your husband don’t expect to make it to your late 70s, I sure wouldn’t take [your retirement benefits] at 62, which would also require that you not have meaningful employment income, because it would reduce the benefits,” Sloan wrote.
We hadn’t factored in this point. You can still work and collect Social Security, but if you haven’t reached your full retirement age, your benefits are reduced by $1 for every $2 you earn above the annual limit. For 2018, the limit is $17,040. If you reach your full retirement age this year, Social Security will deduct $1 for every $3 you earn above $45,360 until the month you reach your full retirement age. Starting with the month you reach your full retirement age, your benefits won’t get docked no matter how much you earn.
In the case of this great debate, there’s a lot to consider — cash needs, health, family longevity, taxes and your working status. Sure, you’ll have to guess on some things. But at least make it an educated guess.