Morgan Stanley Private Equity Advisor Mary Deatherage joins the Barron Roundtable to discuss what retirement savings options will help generate income in a low-performing environment.
Right now, millions of Americans face some difficult financial decisions as the COVID-19 outbreak continues. Some postpone retirement. Others retire early.
3 REASONS TO DELAY SOCIAL SECURITY
If you are older and eligible for Social Security, you may decide to rely on those benefits to help you overcome the current crisis. But be sure to think about the following before going ahead with them.
1. File early when you are eligible for unemployment
You are entitled to your full monthly Social Security benefit, based on your salary history, once you reach full retirement age, which is 66, 67 or somewhere in between, depending on your year of birth. That said, you can claim benefits starting at age 62, albeit at a reduced rate.
3 WAY COVID-19 COULD AFFECT WHEN YOU MUST CLAIM SOCIAL SECURITY BENEFITS
If you don’t have a job during the pandemic, you may be thinking about applying for Social Security to recover financially, even if that means reducing your monthly lifetime benefit. But before you rush into doing that, it’s worth looking at whether you’re eligible for unemployment benefits and what those benefits look like.
Generally speaking, your weekly benefit may be enough to replace about 50% of your previous salary. And right now, lawmakers are working on a second COVID-19 aid package that can further increase weekly unemployment. So it makes sense to find out what unemployment income you’re entitled to before cutting your Social Security benefit on what is likely to be a permanent basis.
2. Filing early thinking you will undo it after the fact
Although claiming Social Security early will usually result in a lifetime reduction of your monthly benefit, there is one way to avoid it: You can undo your presentation within a year, refund all of the benefit money you received, and resubmit in no time. later on time to ensure a higher monthly benefit. It is a strategy you might think to employ during the current crisis. If you don’t have a job or it has affected your income, you may be inclined to claim Social Security and use your benefits as a type of loan that you will pay within the year.
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But what if the economic crisis in question lasts for more than a year and your personal income situation does not improve by the end of those 12 months? At that time, you will be left with a lower monthly benefit for life.
With COVID-19 cases emerging across the country, we cannot rule out the possibility of additional blocking measures that will further delay the economy. As such, you may want to explore a loan outside of Social Security to avoid what could be a permanent reduction in your monthly benefits. Borrowing against the equity in your home, for example, may be a reasonable solution in this regard.
3. File early when you are still working part time
Although tens of millions of Americans have completely lost their jobs as a result of COVID-19, you may find yourself in a situation where you still work part-time. If that’s the case, you should know that you can claim Social Security while you’re also cashing a paycheck. But if you have not yet reached full retirement age, you will risk having a portion of your Social Security benefits withheld if your earnings exceed $ 18,240 this year. The only exception is if you will reach full retirement age in 2020, in which case you can earn up to $ 48,600 this year without affecting your benefits.
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Remember, when you claim Social Security early, it automatically reduces your monthly benefit in the process. If you need money and that is your best source for it, it makes sense to present it earlier. But filing an application early, cutting your benefit, and losing a lot of that Social Security income due to too high earnings makes much less sense, so run the numbers before rushing to apply if you’re still working some way.
At a time when the entire country is dealing with a pandemic, you may be desperate for financial aid. And in some cases, it might make sense for that relief to come in the form of Social Security benefits, even if it means claiming them ahead of time. But before you make any move on it, see what other options you have. In addition to rising unemployment, you may be online for a second stimulus check (lawmakers have already said they are looking to include one in the next aid package). Or, you may have affordable ways to borrow to get dizzy for now. Explore your options before rushing to apply for Social Security so you don’t regret it after the fact.
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