Transcript

[A graphic appears on the screen showing the title of the video, Social Security claiming strategies with Jackie Youssef. Outtakes from the recording can be seen and heard.] 

Hi, I’m Jackie Youssef of Vanguard Personal Advisor Services®. In May, I wrote a blog post about the considerations for when and how to claim Social Security benefits, and today I want to address a number of questions and comments that you have submitted. So let’s jump right in.

[A graphic showing the section title, Spousal Benefit, appears on the screen. Outtakes from the recording can be seen. Stage direction from the video can be heard in the background.]

By way of history, Social Security initially started as a retirement benefit for the primary worker. A few years later, it expanded to include a spousal benefit as well as survivor benefits. So if the spouse never worked outside the home, they are still entitled to up to half of the full retirement benefit of the primary worker.

Now if the spouse is entitled to both—a spousal benefit in addition to their own retirement benefit based on their earning record—Social Security generally pays the higher of the two benefits. It is critical to coordinate between both spouses.

[A graphic appears on the screen that says, “There’s a 40% chance one spouse will live to their early- to mid-90s. Source: Vanguard calculations, based on data from Society of Actuaries, 2014, RP-2014 Mortality Tables.”]

Keep in mind that there is a 40% chance one of the two spouses will live to their early- or mid-90s. In general, the higher earner should be the one that would consider delaying their own benefit to as late as age 70 to ensure the survivor benefit including any delayed retirement credits.

[A graphic showing the section title, Taxes, appears on the screen. Outtakes from the recording can be seen.]

Clearly this is one that you need to be prepared for. As I mentioned earlier, the benefit is generally considered to be tax-efficient. The benefits are taxed based on your income level for the year. So if you take into account the various income components—your pensions, your part-time income, portfolio income, perhaps retirement plan distributions—that could generally subject no more than 85% of the benefit to income tax.

[A graphic appears on the screen that says, “0%, up to 50%, or up to 85% of your benefit could be subject to federal income tax—it depends on your income level each year.”]

Other years, if you’re anticipating lower income, you may end up with none of your benefit being taxed—or up to 50%, or up to 85% is subject to federal income tax. 

[A graphic showing the section title, What Do Other Retirees Do, appears on the screen. Outtakes from the recording can be seen.]

What do other retirees do? When do they claim Social Security? And while we’ve seen significant improvements over the past 20 years in how individuals are claiming—where now we have less individuals claiming as early as 62—we still have a large chunk of the population claiming at their full retirement age, which is 66 to 67, with the least number of individuals really claiming as late as age 70.

[A graphic appears on the screen that says, “When do other retirees collect?” The chart displays a line chart nearly in the shape of a bell curve showing when retirees collect Social Security, with the top of the curve at full retirement age (ages 66–67). The chart is sourced with a URL: https://www.ssa.gov/policy/docs/research-summaries/early-claiming.html ]

And when I think about the reasons for why those individuals are not necessarily delaying beyond full retirement age, part of it, of course, is psychology. Psychology plays a major role in the decision of number of clients and individuals. But I believe that you should take into account your own individual facts and circumstances.

[A graphic showing the section title, In Conclusion, appears on the screen. Outtakes from the recording can be seen.] 

So while Social Security appears to be a complex topic and the decisions around when and how to claim can be difficult, the decision is your individual decision. Feel free to refer to the number of website resources that we have. Or, feel free to reach out to your own financial advisor. But in the meantime, hope this was helpful and thank you for watching.