Plan before you claim Social Security benefits

By Christopher Graw / Guest Column

One of today’s biggest myths is that you can invest your way to financial security in retirement. This incomplete approach, focused only on stocks and investing, has created a gap that’s resulted in millions living with anxiety or a false sense of security. It’s critical for people to close the gap and build a full picture financial plan – one that integrates investments to grow wealth with risk protection products to help defend what matters most.

Beyond investments and savings, Social Security benefits are also an essential part of most people’s comprehensive financial plan to fund retirement. It’s a reliable retirement income stream that can help to fund retirement goals, if set up carefully and thoughtfully.

Stretching retirement income is more important than ever. As life expectancies continue to climb, Americans are increasingly less confident that their savings will last through retirement, according to findings from Northwestern Mutual’s 2016 Planning & Progress Study. It found that many Americans believe there is some chance that they will outlive their savings, with one in three (34 percent) saying the likelihood is 51 percent or better. Notably, 14 percent think that outliving their savings is a definite, or 100 percent, likelihood.

One-third of non-retired Americans (35 percent) expect that Social Security will be their sole or primary source of retirement income compared to nearly half of current retirees (49 percent).

One common misconception is a belief that the staff at the Social Security Administration will help you determine the best-possible financial strategy for you and your family. Unfortunately, this is not in their realm of responsibilities. Their role is to process your paperwork. I cannot stress enough the importance of doing your homework and visiting with a financial expert before you sign on the dotted line at the Social Security Administration office.

What few people know is the decision to start receiving or defer Social Security benefits is one of the biggest decisions a person can make as part of a comprehensive financial plan. The choice could build or reduce your retirement funds by hundreds of thousands of dollars over time.

Iowans can start to collect Social Security as early as age 62; at full retirement age, which depends on when they were born; or as late as age 70. Many people find it enticing to take Social Security as soon as possible. But as I tell anyone who is considering this move, there may be financial advantages to waiting. That’s why I urge my clients to pause their busy lives for a moment to plan.

Every year you defer your benefits past your full retirement age, your benefit increases by 8 percent each year until age 70. This so-called “delayed credit” can help boost your retirement income over time. If you can live in retirement off of other sources of income and delay claiming Social Security benefits, you can realize substantial guaranteed financial rewards.

How many of us wish we had extra money every month during our retirement years? Think of the family vacations, bucket list wishes and charitable gifts – and of course, health care costs – that could be funded with that kind of income.

The goal is to maximize retirement income as part of a comprehensive financial plan. When you have a financial plan that builds wealth and protects wealth, that’s when you can start living life differently. Of course, there’s no one-size-fits-all financial solution for any of us. If you need your payments to start before age 70 to fund your lifestyle, health care needs or another priority, don’t wait.

But if you can, it literally pays to defer your Social Security payments. Take a moment to consider those financial rewards.

Article prepared by Christopher Graw with the cooperation of Northwestern Mutual. Mr. Graw is a wealth management advisor with Northwestern Mutual in Cedar Rapids. He can be reached at (319) 363-3527, or