Planning for your client’s Social Security benefits distribution is a much more complex task than many advisors realize. While the timing of distributions is the most common focus, numerous other strategies can be applied to distributions of which few advisors are aware—and even fewer are actively pursuing to help increase their clients’ total benefit amount.

Distribution Timing
That said, let’s start with the all-important timing of distribution. While benefits may be claimed as early as age 62, in most situations, there is a significant financial benefit to waiting to file until full retirement age (FRA)—which falls between age 66 and 67, depending on the claimant’s birth year. Yet, according to the Social Security administration, over 60 percent of qualified recipients opt to begin receiving benefits before they’ve reached FRA. By claiming early, not only can benefits be reduced by as much as 25 percent, but cost-of-living adjustments are also eliminated, further decreasing the total benefit amount. In contrast, waiting until FRA—and even delaying filing—provides a significant increase in potential monthly income for the rest of the recipient’s retirement years. For every year an individual delays filing for Social Security, benefits receive a delayed retirement credit that increases the dollar amount by 8 percent annually. For example, by waiting as little as four years and claiming at age 70, a 32 percent increase is added to the recipient’s lifetime Social Security income, plus any cost-of-living adjustments—a difference that can add an additional $100,000 to $300,000 in retirement income over the long term. If a spouse is also eligible to receive benefits, his or her own delayed benefits will increase at the same rate of 8 percent per year.

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