How to navigate social security and optimize your benefits

The 4 Assets Vital To A Smooth Retirement
The 4 Assets Vital To A Smooth Retirement

Despite any speculation about its future, Social Security still plays a primary role in how many Americans fund their retirement today. According to the Voya Retire Ready Index study, 61 percent of current retirees rely on Social Security as a major source of income in retirement.

Recently, however, some notable changes were made to how married couples will be able to collect those benefits during retirement. Through a new budget ruling from Congress, "file-and-suspend" and "restricted application" claiming strategies – which have been available to millions of married Americans since 2000 – are about to become history.

Using the file-and-suspend strategy, a couple is able to maximize their benefits even further. Let's say the two have both reached their full retirement age and one has been the primary earner. If the primary earner is eligible for a certain amount of Social Security benefits (for example, $2,000), then their spouse would be eligible for half of that amount. Because these benefits are tied to the primary earner, the spouse cannot collect their benefits until the primary beneficiary files for Social Security. The primary earner in this scenario can file for benefits at full retirement age, allowing for their spouse to receive their $1,000. The primary earner can then suspend their own benefits until they reach the age of 70 to take advantage of the added suspended retirement benefits. This strategy will no longer be available when the new legislation take effect on May 1.

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Restricted application – which is still going to be available for another four years – is where an individual who is at least full retirement age, has not filed for any benefits previously and whose spouse has established a filing date (and could have suspended), files for just the spousal benefit that is based upon the spouse's record. If the individual does not specifically file a restricted application, he or she will need to file for all benefits currently available to him or her.

These two strategies underscore the complexities of Social Security. They also point to the importance of saving and planning ahead to ensure you'll have enough retirement income to meet your needs.
What this change means for you. First, it is important to note that if you are already receiving benefits, you will not be affected by the changes. But, if you were born on or before May 1, 1950, you will need to take action now to evaluate your options. Should you wish to take advantage of the current file-and-suspend rules you must make your election to suspend your benefit by April 30, before the new ruling takes effect on May 1. But, do not wait until the last minute — you can file three months in advance of your birthday. Additionally, those who will turn 62 by December 31 can still use the file-and-suspend strategy when they reach their full retirement age of 66.

Another noteworthy date is those who were born on or before Jan. 1, 1954. If you fall into that category, you will still be able to file a restricted claim of spousal benefits while allowing your own benefit to receive delayed retirement credits. If you fall outside of these cut-off dates and had factored these claiming strategies into your retirement income plan, you will want to revisit your Social Security options to make adjustments to your retirement income plan.

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Understand your options. Regardless of your age or stage, there are key steps you can take now to put yourself in a position to be financially prepared for retirement. Be sure to get your Social Security statement. You can do this by setting up an account on the Social Security Administration's website, or you can a request a paper statement. If you are at least 60 years old, a statement is mailed to you annually. This statement will lay out your estimated benefits at early, full and maximum retirement age. From there, see how your savings fare based on different life expectancy scenarios to figure out what works best for your situation.

By getting educated and understanding how much monthly income you are likely to receive from Social Security and other savings in retirement, you could be putting yourself in a position to retire better. Tools like Voya's myOrangeMoney is a great place to start and find out if your savings are on track.
Don't go at it alone. According to the Voya Retire Ready Index, 66 percent of working Americans plan to start taking Social Security at age 66 or younger – possibly missing out on the opportunity to collect their full benefit. Decisions related to claiming Social Security benefits can be complicated. Before taking any actions, talk to a professional to answer questions about the options you have and to help you plan your retirement income strategy.

Voya's study also found that those who work with a financial professional are more than twice as likely to have calculated how much income is needed to live securely in retirement. Consulting a financial advisor can help you navigate through your Social Security options in order to develop a successful financial plan for retirement and get the most out of your benefits.

Even though these decisions may feel far away, it is important to keep retirement planning top of mind and factor these changes into your strategy. Look at your Social Security options early in the planning process and make decisions with the long term in mind. If you need a reality check on your retirement plans, it is better to get it sooner rather than later so you have enough time to adjust.

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