June 8, 2015

The $900,000 Social Security Mistake

Written by Jason Hiley

Recently I read a story in the Omaha World Herald about a woman in central Nebraska that passed away on her 110th birthday.   Upon reading this, I began thinking about the lifetime Social Security benefits someone would collect if they lived 110 years.   Her husband passed away in 1975, so she spent the last 38 years as a widow likely receiving a Social Security survivor income benefit.  The implications of her husband’s decision on when to take Social Security would have been profound.

Utilizing today’s rules, let’s examine how the age at which her husband elected to receive Social Security would have impacted her cumulative lifetime Social Security benefits as a widow.  First some facts and assumptions:

  • His benefit at Full Retirement Age (66) would have been $2,000 per month
  • By electing at 62 he receives 75% of his benefit, $1,500 per month
  • By electing at 70 he receives 132% of his benefit, $2,640 per month
  • She collects a survivor income benefit for 38 years

Let’s look at the impact the timing of when her husband elected Social Security would have had on her lifetime survivor income benefits.

SurvivingSpouse’s   Age Cumulative   Lifetime Benefit*(spouse   elected @ 62) Cumulative   Lifetime Benefit*(spouse   elected @ 70) Difference 
72 $18,000 $31,680 $13,680
80 $181,381 $319,230 $137,840
90 $443,528 $780,609 $337,081
100 $789,050 $1,388,742 $599,678
110 $1,244,465 $2,190,258 $945,793

*Assumes the annual benefit is increased by 2.8% annually due to Cost of Living Adjustments

The difference between electing at 62 and 70 would be more than $900,000 dollars! 

Although this example may be a bit extreme, it’s obvious there can be a tremendous advantage to delaying the receipt of Social Security.  For many retirees, outliving their money is a primary concern, and living well beyond life expectancy can turn concern into reality.  Delaying Social Security can be a great way to hedge against that risk.

Consult a Professional 

Unfortunately, most people make Social Security decisions without consulting a professional.  You may be surprised to learn that the Social Security office is not allowed to give advice on strategies that would help maximize your potential benefit.  An expert in Social Security planning can take into account variables such as your current age, life expectancy, and financial assets in order to help you identify an election planning strategy best suited to maximize your lifetime Social Security benefit.

Don’t miss out on tens if not hundreds of thousands of dollars in lifetime Social Security benefits by making an uninformed decision.  Call or email us today to arrange a time to discuss your unique situation.

Learn more about Hiley Hunt Wealth Management and who we serve in Omaha, NE – Financial Planning and Investment Management