Did you know the Social Security website now offers a Retirement Calculator?
Calculating Retirement
Have you created your personal Social Security account? The Social Security Administration website offers a variety of resources. Here’s a new feature that may help you with your retirement planning.
When should you start claiming Social Security?
Before we get into a discussion of the Retirement Calculator, let’s talk about your retirement. Many clients ask us how to maximize Social Security benefits and when to start claiming. These are tricky questions to answer because they involve a good degree of forecasting.
If we had a crystal ball that told us how long our clients would live, we could advise them exactly when to start claiming. However, we don’t, and so we have to do our best to make a reasonable prediction that incorporates variables such as your cash flow, liquidity, and marital situation.
There are other special circumstances that may apply. Did you know, for example, that you may still be able to take advantage of the restricted application strategy if you are eligible?
Read this blog post on Law Changes and Social Security Claiming Strategies.
Once you have a clear idea of when it makes sense to retire, you can go forward with retirement calculations using the Retirement Calculator.
What is the my Social Security Retirement Calculator?
One new feature the website offers is the Retirement Calculator. This is a valuable tool that gives estimates based on your actual Social Security earnings record and other inputs that you provide.
It makes sense to use the Retirement Calculator if you are close to retirement and have a lengthy history of earnings. What it can do for you is provide an estimate of the amount of benefit you would receive if you were to start claiming at age 62, your full retirement age, and age 70.
There are a few limitations to what the Social Security Retirement Calculator will do. It will not calculate spousal benefits or advise you as to what claiming strategy is best. That’s for you (possibly with the help of your financial advisor) to decide!
How to use the Social Security Retirement Calculator
When you log into your account, click on the words “Go to Retirement Calculator”. From that point they’ll ask you for basic information such as your age and your estimated future income.
Here’s a sample of the output generated. Please bear in mind that this is just a hypothetical example; for output that is pertinent to your particular situation please consult a financial or tax professional.
To obtain a retirement financial plan that is specific to your situation, your social security benefit can be used in concert with other factors such as income from pensions, investments, and other sources, as well as an estimate of future living expenses. Planning for retirement is good to start at any age but of high importance for individuals five to ten year prior to retirement.
Summary of the Social Security Retirement Calculator
The Social Security Retirement Calculator is a valuable tool especially for anyone within ten years of retirement. What has your experience been using the Social Security Administration website? Please let us know if you have any questions on how to create a Social Security and retirement plan that best suits you.
Ellen Li, CFP® is a lead advisor with Financial Alternatives in La Jolla, CA. When she’s not rock climbing at the gym, she’s focused on helping clients with tough financial planning questions uncovered as part of the EXPERT™ Advisory Process. Set up a time to chat about your situation or her latest climbing destination.