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Retirement Planning > Social Security

New & Improved Online Social-Security Benefits Calculator

By Ed McCarthy, CFP, RICP

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Social Security retirement benefits are an important component of many clients’ retirement incomes, but getting reliable estimates of future benefits has always been awkward. Fortunately, the Social Security Administration has announced an upgrade to its online-benefits calculator.

Social Security Commissioner Michael J. Astrue recently unveiled the new online calculator at: www.socialsecurity.gov/estimator. It will provide immediate and personalized benefit estimates to help people plan for their retirement.

The Retirement Estimator is tied to a person’s actual Social Security earnings record and eliminates the need to manually key in years of earnings information.

“Deciding when to retire is one of the most important and difficult decisions many people face,” Commissioner Astrue says. “The Retirement Estimator greatly improves the information available when trying to decide the right time to retire. It is simple, easy-to-use and will provide highly accurate benefit estimates for those nearing retirement age. For younger workers, it will provide valuable information to help them plan and save for their retirement.”

The Retirement Estimator is interactive, allowing the user to compare different retirement options. For example, a person can change retirement dates or expected future earnings. Individuals also can print out up to three different scenarios at one time, in addition to information about their benefits at age 62 (or their current age, if they’re older), full retirement age and age 70.

The decision on whether to start taking benefits at age 62 remains a hurdle for many retirees, says Shane Barber, a financial advisor with Barber Financial Group in Lenexa, Kan. Barber notes that retirees must consider multiple factors before selecting a benefit-start date:

(1.) The age at which each person is entitled to receive full benefits, which depends on the birth year.

(2.) Varying assets, investments and savings.

(3.) The different rules that apply when a person continues to work while collecting Social Security.

(4.) The strength of the economy and its effect on investments, since it may be better to start taking Social Security payments early and wait until the market goes back up to tap into tax-deferred investments.

Barber’s firm uses FinanceWare’s “Wealthcare” software program to project clients’ retirement income. The firm has discussed the Social Security start-date issue with roughly 75 percent of its 1,100 clients, and — Barber says — the analysis overwhelmingly favors the collection of retirement benefits at age 62 instead of later.

“Nine times out of 10, I would say, taking the Social Security benefit at age 62 gives people the highest probability of (financial) success when compared to age 66 or 70,” he says. “It comes down to, in many cases, the time value of money and how much money you would have to take from your retirement assets to supplement your retirement income while you’re waiting for that somewhat larger paycheck from Social Security. It takes generally around age 85 and sometimes longer to reach the breakeven point.”

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