A person’s entire outlook during her retirement is often much brighter if she has a reliable, consistent, income promised to last her for as long as she lives.
Even better is if that income will increase with inflation, and that upon her death, a portion of that protected income will continue to a survivor spouse.
One of the biggest differences between retirees who have adequate sources of reliable, consistent, lifelong income and retirees whose income is based more on some do-it-yourself formula for converting a portfolio into income is that the former are able to spend money with more confidence.
Think about it: if the security of your income is completely tied to the inevitable ups and downs of the financial markets, you may have money to spend this month, but since you are unsure what your account balances will be next month, you don’t have lot of confidence about spending your money. But when you know there will be a protected income check in your mailbox next month, and each month thereafter, you can more confidently spend your income.
The great news is that you do have a pension. It’s your public pension, and of course, it is your Social Security retirement benefit.
Perhaps you’re thinking, “What’s the big news, everyone knows about Social Security and I know I will get income from it.”
It’s true, everyone does know about Social Security, but unfortunately few understand the importance of properly managing it. In fact, the very idea of managing Social Security retirement benefits is a foreign concept to most people.
While people know they must manage their investments to protect them from risks, few realize how important it could be to their future security to manage their Social Security retirement benefit.
For some, proper management of this benefit can lead to greater after-tax spendable income and an overall reduction in many of the risks to which they might otherwise be exposed.
Social Security provides a source of reliable, consistent, lifelong income, so you want it to be as large as possible. To see how easy it is to increase the amount of your monthly benefit check, you must first understand that there is a great deal of flexibility with regards to the age at which you can start receiving your benefit checks.
In fact, if you are married, the choices and different combinations of possible start dates for you and your spouse literally number in the thousands.
Unfortunately, far too many people make choices that may not be in their best interest, and because of this, they might forfeit tens, or even hundreds of thousands of dollars in protected, tax-advantaged income over their lifetimes.
Think of it this way. Uncle Sam (the provider of the benefit) sits down with you and says, “You can start receiving your benefit at age “X” and receive a monthly income of $1,900. Or, you can start receiving your benefit at an older age of “Y” and receive a monthly income of $2,250. What Uncle Sam doesn’t tell you is that you also have the option of starting your benefit at any other age between A and Z, and the benefit amounts will all be different.
Your choice of start dates of either your worker’s benefit or your spousal benefit will change the amount of the check you receive for the rest of your life. And the amount isn’t different based only on the year you reach a certain age; it will be different based on the month within the year you decide to start your benefit.
Few things will be more important than your future retirement. And the way time flies, it will happen before you know it. We can help you plan for the inevitable.