Social Security retirement income planning: The critical path you can’t afford to miss


Crafting and maintaining a retirement plan entails some of the most important decisions you will ever make.

Getting this right can give you the income you need for a satisfying lifestyle, with adequate reserves against the risks of higher health care costs and long-term care. Doing so can also mean you leave a nice inheritance to the people or causes that you care about. Getting it wrong can yield a life of misery and even a shortened one if you can’t afford to pay for the drugs, operations and other care you may need.

This article could alert you to danger areas other advisors have overlooked and brighten your future. For many, Social Security is a big part of this equation. Even for affluent investors with other resources and sources of income, Social Security is a major asset. It is unwise to marginalize the value of Social Security.

Social Security-claiming decisions — when and how you take your benefits — can be one of the most bewildering and error-prone choices retirees make, and once done, there is usually no going back. A big mistake that remains is taking benefits too early, before reaching full retirement age, or even later. If you expect to live a normal life expectancy, you may be leaving lots of money on the table.  

Not coordinating with your spouse’s claiming strategy is another potentially costly pitfall, as are divorcees not claiming benefits and not carefully planning job income around Social Security tax traps. Another mistake we see is not checking for errors in the Social Security credit record; it is not uncommon to see government mistakes on past earnings that slash benefits unless corrected. Finding errors and fixing them is not as hard as it sounds, and a professional in the retirement planning field can conduct an analysis and report to show you how.

Investors with portfolios, IRAs, annuities and other assets sometimes discount the value of Social Security, but this can be a mistake. If you’ve been a high-earning taxpayer, live long and make smart Social Security claiming choices, the present value of a successful couple’s benefits can be as high as $3,504,000 or more; that’s how much you would have to have invested in a pension to match the income stream. And if you play your tax cards right, the after-tax value could be much, much more than a pension. That’s a serious asset by anyone’s standards and deserves careful planning.

If you have an investment account of even a few hundred thousand dollars or more, making the right Social Security “claiming” decisions can become very complicated, with taxes, joint mortalities, various benefit combinations and benefit ages all impacted by the rest of your unique wealth planning. The wrong choices on investment, IRA and other planning could mean you needlessly pay tax on nearly all your Social Security! And wrong claiming ages and benefits choices by you and your spouse could mean a difference of hundreds of thousands or more in lost lifetime income if you’re not careful.

Running out of money and being forced to rely on children or spend down their inheritance to make ends meet are among retirees’ greatest fears. According to the Wall Street Journal, with over 50 percent of senior widows below the poverty line, leaving a spouse financially insecure is a grave concern. Avoiding the wrong Social Security decisions can go a long way to assure funding for the retirement you want.

Dr. Jeff Camarda is the firm chairman, CEO and chair of the portfolio management board for Camarda Wealth Advisory Group, which has offices in Ponte Vedra Beach and Fleming Island. For more information, call (800) 262-1082.