Welcome. You’re listening to the FinTrust Capital Advisors From The Desk Of Podcast: our podcast about markets, life, and things financial. Today’s podcast about social security is part two of a three-part series featuring FinTrust financial planners, Mary Katherine (MK) and Cassidy Murphy.

MK: Hello, everyone, and welcome to today’s episode of from the desk of our podcast about markets, life, and all things financial. My name is Mary Katherine Glassman, and today I’m joined by my colleague, Cassidy Murphy. We are both financial planners with FinTrust, and today we’ll be continuing our three-part discussion on Social Security. Today we’re focusing on one of the more important financial decisions that most Americans will have to make at some point, which is when to file for Social Security benefits. While some financial gurus say that it’s always best to wait until age 70 to receive a higher benefit, others might argue that it’s always best to take your benefit early because you can invest the cash to try and beat the market. The fact is there’s no “one size fits all” answer that can apply equally to everyone.

Cassidy: Yes, and what makes the most sense for your unique financial situation really depends on a lot of different factors. But, before we jump into those different factors, maybe we should take a moment to recap what exactly we mean by filing early or late, and how when you file affects how much your monthly benefit will be.

MK: Absolutely. So, when we talk about filing early or late, we mean filing for Social Security benefits before or after your full retirement age. If you were born in 1960 or later, your full retirement age is currently 67, and if you were born before 1960, it’s between 66 and 67. Remember from our last Social Security conversation if you file for benefits at your full retirement age, you can receive that full primary insurance amount without any reductions. When we talk about filing early, that means you file to receive benefits before your full retirement age. You can receive your Social Security benefits as early as age 62, but your benefit will be reduced by as much as 30%.

Cassidy: Now, on the flip side of that, you can delay filing for your benefits beyond your full retirement age, and instead that will increase your benefit amount by 8% for each year of delay. Those increases do stop at age 70, though, so once you turn 70, there’s no additional benefit for waiting any longer to file.

MK: Exactly. So, we know that we can file for Social Security between ages 62 and 70, and we know that our benefits will increase or decrease depending on the age that we decide to file. So, can we go ahead and make our filing decisions now?

Cassidy: Well, you could, but you probably want to consider a few other factors first. Now, one of the biggest factors that can influence when you should file is your general health and longevity expectations. So, I mean, for the most part, none of us really know how long we’re going to live. But if you’re in good health and you have longevity in your family, it usually makes sense to delay filing and take the extra 8% credit. Yes, you’ll be missing out on a few years of lower benefit payments, but you’ll eventually make up the difference by receiving a higher benefit for longer. And for most people, that break-even age, where you have to live past this age to make more money by waiting, is somewhere around 82.

MK: That makes sense. It sounds like people who want to delay their Social Security will need to ensure that they have sufficient income to cash flow their needs and wants, or that their portfolios can withstand any withdrawals made to supplement income. If your portfolio assets can’t necessarily support you for a few years, you may be better off in the long run by filing earlier. So, what other factors are there?

Cassidy: Yeah, that’s a good point. And some people just don’t have the assets to live off of without Social Security, so that will force their hand in terms of filing decisions. But for those that do have investments, retirement accounts, pensions, or any other sources of income, it can make a lot of sense to delay. On that note, if you’re of the mind that it makes more sense to file early and invest the proceeds to try and beat the market, I’d caution that research has shown that for that strategy to work, you really need to be a pretty aggressive investor and also have really good timing. There was actually recent research published by the National Bureau of Economic Research, and they found that the average person gives up almost $200,000 in lifetime purchasing power by filing too early.

MK: Age differences in marital status can play into the decision, too, right? Because the decision becomes more complicated when you have two benefits to think about or large age gaps between spouses. I think most people are aware that a spouse who didn’t work outside the home has the ability to file for a spousal benefit based on their spouse’s earnings record. But a catch to that is that they can’t file for a spousal benefit until the working spouse files. So sometimes that can be an argument for filing a little bit earlier.

Cassidy: Yes, that’s true. Marital status and whether both spouses have their own benefits or not is a big consideration. For example, I find that when you have a married couple, and they each have their own earnings history and their own benefit, it can work out really well to have only one spouse delay, and then the other spouse files a little bit earlier. As you mentioned, age differences are important too, because when there are large age gaps, it can make more sense for the older spouse to delay because you need to weigh the importance of a survivor benefit when one spouse passes away, the surviving spouse will continue to receive whichever of the two benefits was higher. And we’ll talk more in-depth about some special scenarios related to survivor benefits and other unique situations in our final episode.

MK: Yes, we still have so much more to cover, but hopefully, anyone listening is starting to see why we say that there’s really no one best strategy. It sounds cliche, but it really all depends, and there is so much to consider. Luckily, this is a decision that no one has to rush into blindly, and we always make it a priority to run Social Security analyses and look at a variety of scenarios with our clients as they approach this decision time. We’ll continue this discussion around some of the less widely understood rules of Social Security in our next episode. But as always, if you have any questions about anything we’ve discussed today and how it might impact your unique financial situation, please reach out. Thanks for listening.

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