Your Social Security statement is critical to smart Social Security Planning. This is where you find your primary insurance amount (PIA), which is the monthly amount SSA estimates you will receive if you apply for benefits at full retirement age.
The statement presumes continued earnings to full retirement age (FRA) and is stated in today’s dollars. Since many will not apply for benefits at their exact full retirement age, the calculators I use in planning adjust the PIA for early or delayed claiming and apply projected cost-of-living adjustments. The calculators then show the income stream and total lifetime benefits for each claiming scenario using the life expectancies you enter. For many, seeing their claiming options in terms of lifetime benefits, including survivor income over the life expectancy of the surviving spouse, is essential to understanding the full impact of clients’ Social Security claiming decisions. It generally leads to a claim age of 70 for the higher-earning spouse, which is great.
Ever since statements were instituted by SSA in 1999, they have shown the benefit estimate at three different claiming ages: 62, FRA, and 70. These estimates take into account the reductions or credits for early or delayed claiming as well as the (generally small) impact of earnings to age 62, FRA, or 70.
The SSA has played around with different ways of presenting the estimates, mainly to discourage early claiming. Rather than showing the age-62 benefit first, it started showing the FRA-age benefit in large type on the front and listed it ahead of the age-62 benefit estimate. Different explanations in the body copy likewise sought to help people understand that starting benefits early would give them permanently lower income.
All of this is good, but the statements do lack the one piece of data that is needed to make the optimal decision on when to claim Social Security: total lifetime benefits under the various claiming scenarios taking into account life expectancies and COLAs. Thankfully, our planning platform takes care of this.
Between the Social Security statements and the calculators used in planning, incorporating Social Security benefits into retirement income planning has never been easier or led to better decisions about when to retire and when to start benefits. A whole generation of retirees will have more Social Security income because of this, especially the many widows-to-be who in 10 to 30 years won’t even realize how much better off they are because a spouse claimed at 70 instead of 62.
Want to learn more about this?
I’ve created a short 23-minute webinar you might find helpful. You can find it here.
Enjoy!
Jim
