Allworth Advice | Will my Social Security benefit increase even if I claim early?

Every week, Allworth Financial’s Amy Wagner and Steve Hruby, CFP, answer your questions. If you, a friend, or someone in your family has a money issue or problem, feel free to send those questions to yourmoney@enquirer.com.

Michael from Harrison: I was told that if I claim Social Security early that my benefit will eventually still increase. Is this true?

Answer: There are two ways we can read this question. The first is in regard to your full benefit amount that’s tied to your Full Retirement Age (FRA): If you claim before your FRA (which is now 67 for most people), your benefit will be permanently reduced for life. It will not increase once you eventually reach your FRA.

For example, let’s say at your FRA of 67 you’re entitled to a "full" benefit of $1,500 a month. If you would start claiming at the earliest age possible of 62 (in most cases), you would actually only receive 70 percent of that full benefit, or $1,050 a month. And this monthly amount would not increase to $1,500 once you reach age 67.

The second way we could interpret this question is in regard to the annual cost of living adjustment (COLA). If this is to what you’re referring, then yes, even if you claim early, your benefit amount will still increase if a COLA is announced – but the amount is usually nominal. For instance, all beneficiaries received a 3.2 percent increase this year (so the $1,050 monthly benefit in the above example would have increased to about $1,084 a month). But a COLA isn’t guaranteed: There was no COLA in 2010, 2011 or 2016.

The Allworth Advice is that deciding when to take Social Security is one of the most important retirement decisions you will make. Please make sure you truly understand all the rules before setting anything in stone. If you need help, consider reaching out to a fiduciary financial advisor.

D.S. in Mason: I own some stock that recently split. Should this matter to me at all?

Answer: In short, as a stockholder, the simple answer is "no." But of course, we can’t just stop our answer there. So, let’s briefly explain the concept of a stock split.

Think of a publicly owned company as a whole pie. Then imagine each slice of pie is one share of that company’s stock. Now, let’s say that pie is currently cut into eight slices and each slice is worth $100 (making the company’s total ‘market capitalization’ $800). If that company announces a two-for-one stock split, it’s doubling the number of slices while decreasing the value of each slice by half. In this case, our pie would be cut into 16 slices – but each slice would now only be valued at $50. Even though there are more shares of stock available, the price of each share is now lower, so the company’s total market capitalization is still the same ($800). Bottom line, just because you have more slices doesn’t mean you have more pie.

Why would a company want to do this? Typically, it’s to make the stock more attractive and accessible to a wider array of investors.

So, back to your situation. You now own more shares of the company, but since the stock price is lower, the total price of those shares is still the same as it was before the split. The good news is that if you were ever considering buying more shares of the company, now could be an opportune time since the stock price is lower.

Here’s The Allworth Advice: Stock splits can make for popular fodder in the financial news media. But for the average investor, while it’s beneficial to be aware of what’s happening to any stock you own, a stock split itself is pretty meaningless.

Responses are for informational purposes only and individuals should consider whether any general recommendation in these responses are suitable for their particular circumstances based on investment objectives, financial situation and needs. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing, including a tax advisor and/or attorney. Retirement planning services offered through Allworth Financial a SEC Registered Investment Advisor. Securities offered through AW Securities, a Registered Broker/Dealer, member FINRA/SIPC. Visit allworthfinancial.com or call (513) 469-7500.

This article originally appeared on Cincinnati Enquirer: Allworth Advice | Will my Social Security benefit increase even if I claim early?