New online tool does Social Security benefit math for you
When to claim your Social Security benefit can be a tough question to answer, but there's a new online tool to help you do the math.
The general rule of thumb is the later you claim, the better because your check will be bigger. But just how much bigger? The Consumer Financial Protection Bureau's new Planning for Retirement tool can show you, in just a couple of clicks.
“To a consumer, when to start claiming Social Security payments is one of the key decisions they can make about their retirement,” said Richard Cordray, director of the Consumer Financial Protection Bureau.
Because claiming your benefit is a “one-time choice,” Cordray said, “it is imperative that consumers can properly weigh their options."
To use the tool, you simply plug in your birthday and highest annual work income to see your estimated benefit for each age, from 62 to 70. Click on the age you think you'd like to retire, and a new benefit amount pops up to show how your choice affects your check. You can also get more specific and detailed suggestions by answering questions about your marital status and financial particulars.
Full retirement age is a magic number for Social Security benefits
“We want consumers to use our tool to know and understand what it means to claim at their full retirement age vs. several years before and several years after,” Cordray said. For most people currently in the workforce, full retirement age is 66 or 67, depending on when you were born. However, you can get your Social Security retirement benefits as early as 62 years old. But there is a tradeoff, because you might see a 25% reduction in your benefit if you claim it before reaching full retirement age.
Cordray said consumers might find it worthwhile to stay in the workforce a few years longer, which lets their Social Security benefits grow and gives them more time to save for retirement.
Jean Setzfand, senior vice president of AARP, likes the new tool. “It’s nice to see the monthly, annual and sum of all benefits at different ages so that people can see the benefits they’re likely to earn or have earned after a life of work.” In addition, Setzfand points out that AARP also has a suite of resources, including a Social Security benefits calculator, retirement calculator and 401(k) tools.
"In our calculator, you can also calculate spousal benefits and soon, we’ll update the tool based on Congress’ recent changes to claiming strategies.”
Financial adviser Reid Abedeen sees the Consumer Financial Protection Bureau's tool as a useful first step.
"It’s a great visual resource to assist pre-retirees and retirees with the beginning stages of their retirement financial planning," Abedeen said. "Once the numbers have been gathered, it is very important for individuals to sit with a seasoned financial adviser to discuss, taxes, health care costs, long-term care, etc."
With the decline in coverage from traditional pension plans that pay a regular monthly payment, Social Security is the only guaranteed monthly income for about 69% of senior consumers, according to a report issued by the Consumer Financial Protection Bureau.
