When should you take social security? paid Impact_Partner
Taking Social Security earlier than when you truly need to can be a tragic mistake. Through proper retirement planning, every piece of your plan should be carefully constructed by considering the end goal: Attain your desired retirement lifestyle through streams of income.
All too often, I’ve seen people make the decision of beginning Social Security income while leaving out several important variables to consider; this sometimes results in beginning withdrawals too early, which may result in money lost over time. Through proper retirement planning, every piece of your plan should be carefully constructed by considering the end goal: attaining your desired retirement lifestyle through streams of income. For example, if someone needs $75,000 of annual retirement income to fulfill their desired lifestyle, any of these generic income instances would do:In all four examples above, the desired lifestyle in retirement is attained thanks to several income streams. As long as the needed income is present monthly, and therefore annually, is there much of a difference of where the income comes from? Yes and no.No, because the needed income is there, the annual retirement lifestyle is met, so who cares where the income comes from? As an example, let’s take a couple, John and Mary, who have the same date of birth, Jan. 1, 1954. If they take their Social Security incomes now, they would receive $2,000 per month each, or $48,000 per year total. For the sake of this example, we’re assuming most of their money is in IRA accounts and they want $90,000 of annual income in retirement.If this family was able to delay their Social Security a little while and retire now , an example like this could be the case:As we see here, the family is living the same lifestyle while receiving a net $90,000 of annual retirement income as before.The family has to take out less money from their IRA account to get the income they need. If this family was able to delay taking their Social Security even a little longer and still retire now, an example like this could be the case:As we see here, the family is just as happy living the same lifestyle as in the first two examples while receiving a net $90,000 of annual retirement income. But with a slightly longer delay of Social Security and a larger increase of Social Security income:The family has to take out less money from their IRA account to get the income they need. The net after-tax income has not changed. The family still has the lifestyle they desire with the $90,000 of net annual retirement income and are impartial for their first few years of retirement if any of their income is coming from Social Security at all. They made a financial decision to find a way to delay and receive larger Social Security income, which resulted in the financial forecast of paying less in taxes and having more money in their investments in the future.With the financial planning and estimated tax software used for the above examples, these results occurred: By waiting and increasing their Social Security income from $2,000/month to $2,500/month each, over an assumed 20-year retirement they would save an estimated $65,529 in federal taxes. Since they didn’t have to take as much money out of their investments from their IRA account each year to get the income they needed, they would have an estimated $305,527 more in their accounts at the end of a 20-year assumed retirement. By waiting and increasing their Social Security income from $2,000/month to $3,000/month each, over an assumed 20-year retirement they would save an estimated $69,492 in federal taxes. Since they didn’t have to withdraw as much of their investments from their IRA account each year to get the income they needed, they would have an estimated $549,498 more in their accounts at the end of a 20-year assumed retirement.to file and begin collecting benefits. In so many retirement cases, the more Social Security income you receive could mean much less tax and more money in your accounts throughout your retirement. I’m not saying to automatically delay to age 70 for Social Security, but that proper financial planning should be done to help determine how long you can delay Social Security to determine if you would receive any tax savings or increase future account values. This content was brought to you by Impact PartnersVoice. Alexander Skijus is not affiliated with or endorsed by the Social Security Administration or any other government agency and does not provide legal or tax advice. Investment advisory services offered through True Life Wealth Management, LLC, a registered investment advisor. Insurance and annuities offered through Alexander Michael Skijus, FL insurance license #W049493. DT916706-0820 Alex Skijus is an Investment Advisor Representative in Tampa, Florida, who focuses on financial planning for people nearing and in retirement and helps them understand t...
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