How to get a bigger Social Security retirement benefit

This article from Heritage Financial Consultants draws on the same core materials that are included in the management consulting program for Levin Group clients. By gaining a deeper understanding of their financial situation and the options available, dentists can make informed decisions that will enable them to reach their retirement goals sooner.
— Roger P. Levin, DDS

John G. McCarthy III is a partner with Heritage Financial Consultants.

Because of the recent economic changes affecting dentistry, many practice owners are deciding to delay retirement and continue working into their 60s and even 70s. To supplement their income, some dentists may be tempted to draw their Social Security benefits at age 62, the earliest possible time.

In fact, according to the Social Security Administration's 2015 Annual Statistical Supplement, about 72% of retired workers receive benefits prior to their full retirement age. But waiting longer could significantly increase your monthly retirement income, so weigh your options carefully before making a decision.

Timing counts

Your monthly Social Security retirement benefit is based on your lifetime earnings. Your base benefit -- the amount you'll receive at full retirement age -- is calculated using a formula that takes into account your 35 highest earnings years.

If you file for retirement benefits before reaching full retirement age (66 to 67, depending on your birth year), your benefit will be permanently reduced. For example, at age 62, each benefit check will be 25% to 30% less than it would have been had you waited and claimed your benefit at full retirement age.

Alternatively, if you postpone filing for benefits past your full retirement age, you'll earn delayed retirement credits for each month you wait, up until age 70. Delayed retirement credits will increase the amount you receive by about 8% per year if you were born in 1943 or later.

The chart below shows how a monthly benefit of $1,800 at full retirement age (66) would be affected if claimed as early as age 62 or as late as age 70. This is a hypothetical example used for illustrative purposes only -- your benefits and results will vary.

Chart courtesy of Heritage Financial Consultants.

Early or late?

Should you begin receiving Social Security benefits early, or wait until full retirement age or even longer? If you absolutely need the money right away, your decision is clear-cut; otherwise, there's no right answer. But take time to make an informed, well-reasoned decision.

Consider factors such as how much retirement income you'll need, your life expectancy, how your spouse or survivors might be affected, whether you plan to continue practicing after you start receiving benefits, what salary you expect to draw from your practice, and how your income taxes might be affected. Weigh the pros and cons, and then decide what makes the best sense for you.

John G. McCarthy III is a partner with Heritage Financial Consultants and a registered representative of Lincoln Financial Securities offered through Lincoln Financial Advisors, a broker-dealer (Member SIPC) and investment advisory. Heritage Financial Consultants is not an affiliate of Lincoln Financial Advisors. Lincoln Financial Advisors does not provide legal or tax advice. CRN-1559901-080116

Disclaimer: The comments in this article are not meant to be taken as financial advice. Levin Financial Group recommends that you always consult with your financial planner before making any significant changes in your financial situation.

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