July 16, 2022

At Oldfather Financial Services, we have purchased Social Security timing software that will give our clients the exact month they should begin taking Social Security.  It takes into consideration your past earnings, your spouse’s information, cost of living increases, and unfortunately your year of death(Guess!).  With that it provides several different election dates and various strategies to derive on a maximum scenario.  It will give a dollar amount of how much income your household can anticipate in receiving in Social Security benefits during your lifetimes. Please stop in with your Social Security statement and we can provide that date that will maximize your Social Security benefits. So, now that hard decision has been made, it makes retirement pretty easy?  Not so fast.

We use the timing software as the first step of the process to start discussing retirement income projections. The Social Security program only takes into consideration Social Security.  It does not take into consideration a lot of other factors that individual or couples must also consider. The biggest factor is taxes since Social Security and other retirement activities will cause a tax bill each year.

Current employment – if you are currently working and below your Full Retirement Age (FRA) then there are income limits.  If you are over your FRA and working or receiving distributions you may have to pay taxes on a portion of your Social Security Benefits depending on your income levels.

Current retirement accounts and type - if you have a retirement accounts like IRA or 401k you are required to take a distribution when you turn 70.5.  The amount is based up on the account balance at the end of the year divided by an IRS factor.  Roughly it is about 4%.  It is important to take into consideration that income when forecasting your retirement.  Sometimes that number can be substantial enough to put you into a different tax bracket, so you may not want to wait until you are 70.5 to begin distributions.

A lot of clients like to look at converting part of their IRA into a ROTH account.  Everyone’s situation is different, so you really need to work through all the variables before you make a decision to do so. (We can do that for you.)  Typically, the client wants to reduce the amount of income the year they do a ROTH conversion so taking Social Security may not make financial sense during some years.

Are you planning any asset sales in the next few years?  Sale of your business, land, rentals, home etc…   You should take into consideration those transactions on your strategy of when to take Social Security and how your taxes will be impacted.

Lastly, and probably the most important is your spouse situation on the factors above.  Their Social Security and Required Minimum Distributions are on their own accounts, so it may have a big impact on a couples finances.  Also the age differences and timing will come into play.

So, you cannot just look at your Social Security benefits in isolation.  You may take into consideration the couples entire financial statement when forecasting your retirement income.  Lucky for you we have a program that will do that for our clients and allow a lot of “what if’s” to be played out.  Give us a call.