Deciding When to Take Social Security Benefits

In a previous newsletter article, I mentioned that choosing the right Social Security claiming strategy could increase your retirement income by as much as 9%.  This article will discuss the simpler concept of just choosing when to start taking Social Security benefits.  The more complicated claiming strategies will be saved for a future article.

Most Americans know that they can begin taking Social Security benefits as early as age 62, however, nearly 40% of Social Security beneficiaries do not realize that if they claim benefits before their full retirement age, they will receive a permanent reduction in benefits.  Some beneficiaries believe that, if they take their benefit early at 62, the benefit will increase at full retirement age. This is not the case.

The first thing to know when making your decision is what your full retirement age is.  If you were born after 1960, your full retirement age is 67.  If you were born before 1960, you can find your full retirement age below:

The next thing you need to know is how much you lose by claiming benefits early and how much you gain by waiting until sometime after your full retirement age.  The reduction in benefit amount is equal to five-ninths of 1% for each of the 36 months immediately preceding your full retirement age, plus an additional five-twelfths of 1% for each month before that. The increase in benefit amount if you wait to claim benefits until after your full retirement age is two-thirds of 1% for each month you delay, up until age 70 when the benefit amount reaches its maximum.

While waiting to take benefits may seem like a no-brainer, you will also have to consider the fact that you will be missing years’ worth of benefits and calculate your “break-even point” – the age at which the sum of your higher benefits adds up to the amount you missed out on by claiming late.  If you expect to live after your break-even age, then you will be wise to delay taking benefits until your full retirement age as long as it is financially feasible for you to wait.

The following chart shows the reduction or increase in benefits compared with a full retirement age of 67, based on the age at which you claim benefits. It also shows the number of years you would need to receive benefits to break even, compared with claiming at age 62. It is based on the average monthly benefit of $1,404 at full retirement age.[1]

You can visit www.ssa.gov/myaccount/ to find out what your projected retirement benefits will be at your full retirement age, age 62 and age 70.  Based on your expected benefit at full retirement age, you can use the formulas described above to determine what your benefits will look like in the year you choose to claim benefits, and you can also calculate your break-even point.

Of course, determining when to begin taking Social Security benefits is just one piece of a very large and complex puzzle.  Every person has a unique situation affecting their retirement decisions, so general guidelines are meant to be just that – general.  We recommend that you consult with an advisor who can take a holistic look at your goals and resources to determine a retirement strategy and the Social Security claiming strategy that is right for you.

[1] https://www.fool.com/investing/2018/01/16/the-1-chart-you-need-to-decide-when-to-take-social.aspx

Ask Kit Kat: Pet Allergies

Hook Law Center: Kit Kat, what is the best way to handle pet allergies?

Kat Kat: Well, I suppose the simplest way is to not adopt a pet in the first place, if you know you have pet allergies. However, many people are not satisfied with that response, so they go ahead and deal with the allergy, rather than denying themselves the pleasure of a pet. Fortunately, there are degrees of being allergic to pets, so some with mild allergies can, with some precautions and medications, make it work. However, those with severe allergies should not probably not take the risk. If pet fur sends you into an asthma attack and to the emergency room, then perhaps you can satisfy your desire to interact with pets through volunteering in fundraisers for pets or by becoming a member of groups such as the US Humane Society or the ASPCA.

If you have decided to have a pet despite an allergy, Kenneth Mendez, chief executive of the nonprofit Asthma and Allergy Foundation of America (AAFA), recommends keeping “pets out of the bedroom, avoid carpets in the home, and use products certified as asthma and allergy friendly.” Olivia Lanes of Pittsburgh, PA is one such person who plunged ahead with pet ownership despite her allergy. She has 2 cats—Cupcake and Sophie, as well as a dog named Nova. She sneezes a lot and often has congestion, but she wouldn’t give up her pets for anything. Tracy Spiering has a 20-year old cat named Oatmeal Cookie, and 2 other cats. She requires bi-monthly shots to keep her allergies in check, but to her, giving her cats away is not an option. “It would be like giving away your kid.”

Even though some pets cause fewer allergic reactions than others, Mr. Mendez of the AAFA says there’s no such thing as a 100 % hypoallergenic animal. Another suggestion by an American Kennel Club spokesperson is to try out a pet by interacting with the specific pet for a few times to see if they cause an allergic reaction. Ashok Wahi of Basking Ridge, NJ has developed a non-prescription gel called NasalGuard which sells for $14.85. It can be applied to the nasal passages, and helps reduce allergic reactions. He should know. He developed it for his daughter, so she could keep her cat Ebony.

In summary, the decision to proceed with pet ownership despite an allergy is an individual one. Don’t feel guilty if you decide it just won’t work for you. There are other ways to support animal welfare. (Khadeeja Saafdar, “My Cat Allergy Is Killing Me, but Cupcake Stays,” The Wall Street Journal, March 28, 2019)