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Tax Considerations When Delaying Social Security

Delaying Social Security can potentially contribute to an overall tax strategy for retirement. Every case is different, but generally speaking, when you add taxes to the mix, the case for delaying Social Security becomes even stronger than usual.

How Time Horizon and Discount Rate Affect Social Security

One way to view the decision to delay Social Security as an “investment” is by using a present value calculation to identify which strategy can provide the most lifetime Social Security benefits and which strategy creates the lowest funding needs for your investment portfolio. This calculation requires deciding on a time horizon and a discount rate.

Social Security as an “Investment”

The alternative to treating Social Security as insurance is to view it as an investment, or as a gamble on how long one lives. This can be problematic.

When Are People Claiming Social Security?

One of the hottest topics in retirement income planning over the past several years has been how to help individuals strategize on their Social Security claiming decisions.

Calculating Social Security Retirement Benefits

I will discuss the philosophy of claiming strategies later, but first, it is meaningful to first consider how retirement benefits are calculated.

The Social Security Administration has now followed the same approach for calculating benefits since 1979.

Introducing the Social Security Claiming Decision

For the vast majority of Americans, Social Security benefits serve as the core of a retirement income strategy. As a government-backed, inflation-adjusted monthly income for life, Social Security benefits help to manage longevity risk, inflation risk, and market risk.

A Brief History of Social Security

Recipients of Social Security benefits today are not just retirees – they’re disabled workers, spouses and young children of deceased or disabled workers, and the spouses and survivors of retirees. This was not always the case.

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