A recent survey conducted by the Nationwide Retirement Institute revealed that while about 54% of respondents said they know exactly how to maximize Social Security benefits, only 6% were able to identify the factors that determine a maximum benefit. This strongly suggests that most people don’t know as much about Social Security as they think they do.
On Nationwide’s blog, Retirement Institute vice president Doug Ewing answered some frequently asked questions clients have about Social Security.
Do Social Security Benefits Provide Enough Income to Live On?
Generally, no. But the program was never intended to be a sole source of retirement income. When most people look at their essential monthly retirement expenses and compare them to their projected monthly Social Security benefit, they’re likely to find a significant gap. Financial professionals can help clients make the most of their benefits and bridge the retirement income gap.
When Do You Receive Full Social Security Benefits?
Full benefits are provided at full retirement age (FRA). For people born in 1954 or earlier, FRA is 66. For those born from 1955 to 1959, FRA increases by two months each year. FRA is 67 for those born in 1960 or later. Retirement benefits get reduced for those who claim them before FRA.
Can Social Security Benefits Be Increased by Waiting to Claim Them?
Yes. While waiting until FRA ensures clients will receive their full benefits, waiting beyond FRA can produce an even larger benefit. For every year a client waits beyond full retirement age to claim, their benefit increases by 8% of their full benefit. Someone with an FRA of 67 who waits until 70 to claim would receive a 24% higher monthly check.
However, benefits stop growing when the client turns 70, so make sure they don’t wait beyond age 70 to claim.
If Social Security Benefits Are Claimed Early, Will They Go up at Full Retirement Age?
No. “The amount in effect when you claim benefits, plus any subsequent cost-of-living increases, is the amount you will receive through your lifetime,” Ewing wrote. “That’s why your filing decision is so important.”
Will You Receive Fewer Social Security Benefits if Your Spouse Passes Away?
Yes. Married couples tend to receive two monthly Social Security checks. But if one spouse dies, the survivor receives the higher of those two checks. However, that does mean that the survivor receives less Social Security income on a household level.
Can You Fix a Social Security Filing Mistake?
If a client claims Social Security early but changes their mind, that limits their options. In the first year after claiming, they can withdraw their application, repay any benefits they’ve received, and refile later. Once they hit full retirement age, they can suspend their benefit and receive an 8% delayed retirement credit each year.
“When it comes down to it, everyone’s situation is different when it comes to their retirement and Social Security planning,” Ewing told financial advisors. “As your client’s trusted financial professional, you can help guide them when it comes to making the best decision for them by providing a base level of knowledge about the program and showing them ways to optimize their filing decision.”
Nationwide offers a suite of actively managed ETFs within equities for financial advisors. These funds include the Nationwide Nasdaq-100 Risk-Managed Income ETF (NUSI), the Nationwide S&P 500 Risk-Managed Income ETF (NSPI), the Nationwide Dow Jones Risk-Managed Income ETF (NDJI), and the Nationwide Russell 2000 Risk-Managed Income ETF (NTKI).
For more news, information, and strategy, visit the Retirement Income Channel.