Social security options for “non-retired” customers

Scanning the job market news today, you would think pickleball courts and golf courses should be deserted. The wave of retirements fueled by the pandemic has reversed. Many of those who retired in the past two years are returning to work or thinking about it.

A CNBC survey found that 68% of those who retired during the pandemic would consider returning to work. Many found that their savings were not going to withstand inflation. And others because, well, not working wasn’t as fun as they imagined.

One of the first questions people considering retirement ask their financial advisors is what to do about Social Security. Pandemic disruptions, however, have caused many people to jump based on poor judgment or friendly but misinformed advice.

How can I know? Because I help financial advisors research Social Security deposit options and recommend the ones that will benefit their clients the most. Here is the information, from my experience, that is most helpful to clients considering “opting out.”

Best case: Clients quit their jobs but never filed for Social Security. The offices of the Social Security Administration closed abruptly in March 2020 and did not reopen until the beginning of this year. They moved to online and phone service, but some people may have assumed they couldn’t apply for benefits during the shutdown or ran into roadblocks and didn’t persist.

Anyone who has retired without a deposit is free and clear to take up employment. My colleague Paul Samuelson would tell them they should.

Working as long as possible will earn clients more credits towards their eventual Social Security benefit. It will also allow them to take advantage of employer-sponsored retirement plans or Individual Retirement Accounts (IRAs) to save more money for retirement.

Second best case: Clients had reached full Social Security (FRA) retirement age. Anyone whose work record qualifies them can file for Social Security at age 62, but they’ll take a big hit to their total lifetime benefits. Until the age that Social Security calls “full retirement age” (FRA) will increase their monthly benefit.

And, once a person has reached their FRA, they can earn as much income as they want without penalty. The full retirement age varies according to the year of birth. For example, anyone born in 1957 who turns 65 this year has a full retirement age of 66 and 6 months.

Before full retirement age, Social Security limits what clients can earn without losing some benefits. If clients are collecting Social Security and “retiring,” they could be affected by the earnings limit before reaching full retirement age.

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