June Wealth Strategies

Social Security may not be a major part of your retirement savings plan, but it can still provide significant benefits. Employing the right strategies for taking that benefit can help you get the most out of the program. Here are some of the key factors to consider:

How Your Benefit Amount is Determined

Your Social Security benefit is based on your earnings over your 35 highest-earning years. For 2023, the maximum creditable earnings is $160,200, so any earnings over that annual limit won’t impact your benefits. If you reached the wage base limit for each year, in 2023 you would receive an estimated $3,627 per month as long as you retire at full retirement age.

When to Start Taking Your Benefit

Full retirement age depends on when you were born:

Birth Year	Full Retirement Age
1943—1954	66
1955	66 and 2 months
1956	66 and 4 months
1957	66 and 6 months
1958	66 and 8 months
1959	66 and 10 months
1960 or later	67

Note that if you start taking benefits three years prior to reaching your full retirement age, they decrease by approximately 6.7% annually. If your benefits are claimed more than three years earlier, the annual reduction is reduced to 5%.  As an example, if a client has a FRA (Full Retirement Age) of 67 and decides to take their benefit at ag 62 (earliest individual claiming age), then their benefit would be reduced by 30%.  It’s important to note that any benefits claimed prior to FRA, will result in a permanent reduction of benefits.

In choosing when to take your benefit, consider the following:

• Can You Invest Your Benefit Elsewhere? Social Security benefits increase by 8% per year from full retirement age to age 70
• Do You Have Legacy Goals? Someone with substantial legacy goals may wish to begin Social Security earlier in order to preserve their personal assets
• Will You Continue to Work? Social Security benefits can be potentially reduced by employment income via withholding requirements
• Are You in Good Health? If you are, you may wish to take Social Security earlier, while you are better able to enjoy the extra income
• Do You Want to Maximize Your Spouse’s Benefit? Delaying your own benefit may allow for a larger survivor benefit

Spousal Planning Strategies

As a spouse, you are eligible for the larger of a benefit based off your own work history or 50% of the benefit based off your spouse’s work history.  This is also commonly referred to as the spousal benefit.  Generally speaking, you must be married at least one year in order to be eligible for a spousal benefit.  It’s also important to note that you can’t claim a spousal benefit until the other spouse has already begun their claim.  This is a primary difference for individuals eligible for an ex-spousal benefit.  If an individual meets all the eligibility requirements for an ex-spousal benefit, they can claim off their ex-spouse’s record as long as the ex-spouse is eligible to claim their own retirement benefit (the ex-spouse does not have to be on the claim).

Survivor Planning Strategies

A surviving spouse is generally eligible for their benefit based on their own work history or the deceased spouse’s benefit record, whichever is larger.  Deemed filing rules do not apply to eligible survivor benefits, which essentially means you can begin one benefit (either your survivor or retirement) and switch to the larger benefit at a later date. Unlike retirement benefits which earn Delayed Retirement Credits beyond full retirement age (FRA), survivor benefits are maximized at FRA.  The same rules apply to an ex-spouse, as long as the marriage lasted at least ten years and you weren’t remarried prior to age 60. Keep in mind that one individual can provide benefits to many others, including their spouse, their ex-spouse, any minor children and their dependent parents.

The Outlook for Social Security

Many pre-retirees are concerned over the future health of the entire Social Security program. Retirement benefits are projected to exceed the fund’s total tax and investment income every year through 2032. The Social Security Board of Trustees has proposed solutions that include increasing the tax rate on current workers or reducing benefits. It remains to be seen what steps will be taken, although the program is likely to continue in some form.

Social Security is likely not the centerpiece of your retirement plan, but it still can provide you with significant benefits.  To make sure you’re getting the most out of it, start by watching Sascha’s webinar for more details, or contact your Baird Financial Advisor.  Baird has a wide variety of Social Security planning tools that can assist you in making an informed decision around the timing of your benefits.

For information on our upcoming webinars, as well as more past recordings, visit our Wealth Strategies page.

The information reflected on this page are Baird expert opinions today and are subject to change. The information provided here has not taken into consideration the investment goals or needs of any specific investor and investors should not make any investment decisions based solely on this information. Past performance is not a guarantee of future results. All investments have some level of risk, and investors have different time horizons, goals and risk tolerances, so speak to your Baird Financial Advisor before taking action.