Should you claim Social Security sooner because your investments are dwindling? | Smart Change: Personal Finances

(Christy Bieber)

Many retirees have lost money in the stock market this year, and despite the recent rally, the bad times may not be over for investors.

If you’re worried about a dwindling wallet balance in these turbulent times, you might be considering claiming Social Security ASAP. Before going ahead with this strategy, however, there are a few key things to consider.

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Don’t make long-term decisions in response to short-term conditions

Claiming Social Security is a lifelong choice for most people. It can be canceled in certain situations, but only within 12 months of your initial request and if you can repay all the benefits you have received to date. That means you’re probably stuck with your decision when you file a claim for benefits.

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Since starting your checks anytime before age 70 means accepting a monthly payment less than your maximum benefit, you don’t want to rush through the process, especially if you’re tempted to do so because of performance. current state of your investments. .

Rather than going ahead with starting your checks, consider Why you want to apply for Social Security now instead of waiting and how it might affect your long-term retirement finances.

If you are worried that you will have to sell your investments at a low point in the market to generate income, and you cannot wait for the market recovery which is almost certain to occur, then start social security to preserve your nest egg and avoid locking in losses can make sense.

But if you have enough savings to cover your basic needs without selling your assets during this market downturn, don’t rush to claim Social Security. And ideally, this will be the situation in which you will find yourself since retirees do not want to be overexposed to the stock market. because conditions like the ones we are currently experiencing.

Older people should have an appropriate mix of assets that preserves their wealth as they approach retirement. They should also have a few years of liquid savings so they can weather short-term volatility without making major financial decisions that could hurt them in the long run.

How do you decide when to apply for Social Security?

You should make your Social Security choice based on your efforts to maximize your monthly and long-term retirement income, not on the performance of your portfolio in any given month or year.

For many people, waiting to claim benefits is the best choice. The Social Security program was originally designed so that the age at which a person begins to collect benefits did not matter. Early filers received smaller but more checks. Late filers received fewer checks, but each was bigger. However, this formula was put in place when life expectancies were shorter. Many people today are surviving those earlier projections and as a result people can collect so many checks with deferred retirement credits that in total they more than make up for the lost payments due to the wait to start the benefits.

But you’ll have to think about your health to decide whether the certainty of starting payments sooner outweighs the possibility of collecting more total benefits if you wait. It is this compromise that should guide your decision. Otherwise, review your portfolio allocations to reduce your exposure to risk if you are retired or close to retirement. This will allow you to make your Social Security decision based on what’s optimal for your situation, without panicking that your investments won’t support you during a bear market.

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