Example of claiming before NRA: We had a couple who became clients of our firm seven months after their Social Security payments began. The wife had started Social Security payments just one year before NRA, which reduced the monthly payment amount.
We reviewed paying back the Social Security amount received and determined it would be a strain with their current financial obligations. We also reviewed suspending payments within the first 12 months of commencing benefits, to increase the Social Security benefit amount by deferring the restart of payments until an older age.
Ultimately, this was the best decision for their situation. Payment amounts increased from the lower base incurred by starting payments prior to NRA, at a rate of 8 percent annually up to age 70. The couple, not needing the current Social Security payments, will likely be in a better long-term financial position based upon the increased monthly payments when the wife starts collecting Social Security payments.
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Example of starting claim at NRA: We also have a client who is looking to retire at NRA. She has an annuity and a small pension and is currently receiving survivor benefit on her deceased husband's pension.
She may draw upon her deceased spouse's Social Security benefit while deferring her own benefit and, ultimately, receive an 8 percent higher Social Security payment for each year she waits to collect her benefit. She may also draw upon her individual retirement account savings to cover any current shortfall, although this is not likely unless an emergency arises.
In addition to Social Security review, there are options to explore for pension maximization, such as a lump-sum payout or lifetime payout period. Typically, pension payout is based upon single or joint life payment streams. Review your pension plan with your wealth advisor and discuss the optimal starting age to begin payouts along with specific retirement plan rules to maximize your pension payout.