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Is it Ever a Good Idea to Claim Social Security Early?
Greg Lavelle • October 11, 2021
We often remind our readers that claiming Social Security benefits earlier than full retirement age can result in smaller checks for the rest of your life. Likewise, waiting beyond full retirement age can actually help you earn larger checks - up to 8 percent larger for each year you wait, up to age 70.
So you might be wondering, “Is it ever a good idea to claim Social Security benefits early?” Actually, yes. In some cases it does make sense to go ahead and start receiving your checks before full retirement age.
You want to pay down debts before beginning withdrawals from your retirement plan.
You’ll need to live off of a combination of retirement savings, Social Security, and any other income that you’ve established for the rest of your life. But if you’re carrying significant debts into retirement, those can eat into your monthly budget. Claiming Social Security benefits now can help you pay down debts faster, and lower the amount that you eventually pay toward interest.
You’ve already banked your 35 highest-earning years.
Social Security payments are calculated based upon the 35 highest-earning years of your career. If you’ve already banked those years, you won’t increase your checks this way. However, claiming those checks before full retirement age will still mean that they are reduced a bit.
You need to quit working.
At some point, you might need to retire earlier than you had planned. Industry layoffs, health issues, and other factors can force a change of plans. The good news is that you can go ahead and start enjoying your retirement now. But you might simply need more funds in order to do so. In this case, you might claim Social Security early out of necessity.
You’ve cut down to working part time.
Some people choose to gradually cut back on work hours, and ease into retirement. If you’re only working part time, you might be able to claim Social Security benefits now. Some of your benefits will be withheld according to earnings, so let’s discuss this issue in depth in order to help you decide whether this choice is worth it.
You’re in poor health or have been diagnosed with a terminal illness.
In the event that you expect a shortened lifespan, it usually makes sense to go ahead and claim your Social Security benefits now. After all, checks stop when you pass away, unless you have survivors entitled to benefits.
No one is relying upon your benefits.
After you pass away, it is possible for a surviving spouse or disabled child to draw at least part of your scheduled benefits. You would ordinarily want to maximize this amount as much as possible in order to provide for them. But if no one else will be relying upon your checks, you might as well claim them now if it otherwise suits you to do so.
Timing your claim for Social Security can be a complex issue, and certain other situations can be factored into this decision. Call us before you retire, so that we can help you decide upon the best time to file your claim.
As a business owner, safeguarding your enterprise against unforeseen events is crucial for long-term success. Life insurance offers several strategies to protect your business, ensure continuity, and provide financial stability during challenging times. Two primary methods are buy-sell agreements and key person insurance. Buy-Sell Agreements A buy-sell agreement is a legally binding contract that outlines the procedure for transferring ownership if an owner departs due to death, disability, or retirement. Funding this agreement with life insurance ensures a smooth transition and financial security for the remaining owners and the departing owner's beneficiaries. Types of Buy-Sell Agreements Cross-Purchase Agreement: Each owner purchases a life insurance policy on the other owners. Upon an owner's death, the surviving owners use the policy proceeds to buy the deceased owner's share. This method is often suitable for businesses with a few owners. Entity Purchase Agreement: The business itself owns life insurance policies on each owner. If an owner passes away, the business uses the proceeds to buy back the deceased owner's share, redistributing it among the remaining owners. This approach is typically preferred for businesses with multiple owners. Key Person Insurance Key person insurance is a policy that a business takes out on essential employees whose loss could significantly impact operations. The business owns the policy, pays the premiums, and is the beneficiary. If a key person dies or becomes disabled, the policy proceeds can be used to: Cover the costs of finding and training a replacement. Offset lost revenue resulting from the key person's absence. Reassure clients, creditors, and investors of the business's stability. This strategy is vital for businesses where certain individuals are integral to success, such as top executives, lead developers, or primary sales personnel. Additional Strategies Beyond buy-sell agreements and key person insurance, consider these life insurance strategies: Collateral Assignment: Use a life insurance policy as collateral for business loans. In the event of the owner's death, the lender is paid from the policy proceeds, preventing financial strain on the business. Executive Bonus Plans: Provide key employees with life insurance policies as part of their compensation package. This not only offers them personal financial protection but also serves as an incentive for retention. Deferred Compensation Plans: Promise to pay key employees a certain amount at retirement, funded through life insurance policies. This ensures the business can meet its obligations without affecting cash flow. Implementing life insurance strategies is essential for business owners aiming to protect their enterprises from unforeseen events. Work with us to explore your life insurance options and we can help your business remain resilient and continue to thrive.
Term life insurance provides coverage for a specified period, such as 10, 20, or 30 years. If you outlive your term policy, the coverage ends, and no death benefit is paid to your beneficiaries. As you approach the end of your term, it's essential to evaluate your current financial situation and consider options to maintain life insurance coverage if needed. Options to Consider Annual Renewable Term: Some term policies offer an option to renew annually after the initial term expires. While this allows you to extend coverage without a medical exam, premiums typically increase each year based on your age, making it a potentially costly option over time. PROGRESSIVE.COM Policy Conversion: Term-to-Permanent Conversion: Many term policies include a conversion feature, allowing you to convert your term policy into a permanent life insurance policy, such as whole or universal life, without undergoing a medical examination. This option can provide lifelong coverage and build cash value, but premiums will be higher than those of the original term policy. NEWYORKLIFE.COM Purchasing a New Policy New Term Policy: Applying for a new term life insurance policy can be an option, especially if you're still in good health. However, premiums will be higher due to increased age, and you may need to undergo a medical exam. Permanent Life Insurance: Alternatively, you might consider purchasing a permanent life insurance policy, which provides lifelong coverage and accumulates cash value. This option is generally more expensive but offers additional benefits. Exploring Alternative Coverage: Final Expense Insurance: Designed to cover end-of-life expenses, such as funeral costs and medical bills, final expense insurance offers a smaller death benefit with more affordable premiums and may not require a medical exam. Guaranteed Universal Life Insurance: This type of policy provides coverage for a specified age (e.g., up to age 90 or 100) with lower premiums compared to whole life insurance, focusing primarily on the death benefit without significant cash value accumulation. Take Action Now As your term life insurance policy nears its expiration, assess your current financial needs and health status to determine the most suitable course of action. Consulting with an insurance professional can help you navigate your options and select the best solution to ensure continued financial protection for your loved ones.
