The Impact of the Social Security Fairness Act

By David Munn, CFP

The Social Security Fairness Act, signed into law on January 5, 2025, represents a significant shift in the U.S. Social Security system by repealing two provisions—the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO)—that previously reduced or eliminated benefits for certain public sector employees. This legislative change aims to provide equitable Social Security benefits to individuals who have dedicated their careers to public service.

Understanding WEP and GPO

The WEP and GPO were enacted to adjust Social Security benefits for individuals who received pensions from employment not covered by Social Security taxes. The WEP affected workers with non-covered pensions by reducing their Social Security retirement or disability benefits, while the GPO reduced spousal or survivor benefits for individuals receiving such pensions. These provisions primarily impacted public sector employees, including teachers, firefighters, police officers, and federal workers, often resulting in significantly reduced or eliminated Social Security benefits.

The repeal of WEP and GPO through the Social Security Fairness Act restores full Social Security benefits to approximately 3.2 million affected individuals. 

Eligibility for Benefits

With the repeal of WEP and GPO, individuals who were previously subject to these provisions may now be eligible for increased Social Security benefits. Eligible groups include:

• Retirees with Non-Covered Pensions: Individuals who receive pensions from employment not covered by Social Security taxes and who were previously affected by WEP may now receive full retirement or disability benefits.

• Spouses and Survivors: Spouses, ex-spouses, and surviving spouses who were subject to GPO reductions may now be eligible for full spousal or survivor benefits. This change is particularly significant for those who may have been denied benefits or received reduced amounts due to the GPO.
  
  

Steps to Receive Benefits

To access the benefits provided by the Social Security Fairness Act, individuals should take the following steps:

1. Verify Eligibility: Determine if you were previously affected by WEP or GPO. If you received a non-covered pension and experienced reduced Social Security benefits, you are likely eligible for increased benefits under the new law.
   
   

2. Apply for Benefits: If you have not previously applied for Social Security benefits due to WEP or GPO, you should apply as soon as possible. Applications can be submitted online through the Social Security Administration (SSA) website at ssa.gov/apply. For personalized assistance, you can call the SSA at 1-800-772-1213, Monday through Friday, from 9:00 a.m. to 6:00 p.m. ET. When prompted, say “Fairness Act” to be connected to a representative trained in WEP-GPO matters.
   
   

3. Update Personal Information: Ensure that your mailing address, direct deposit information, and other personal details are current with the SSA. Accurate information will facilitate timely processing of your benefits and any retroactive payments.
   
   

4. Monitor Communications from SSA: The SSA is in the process of issuing retroactive payments and adjusting monthly benefits. Stay informed by regularly checking your mail and any official communications from the SSA regarding your benefits.
   
   

Implementation Timeline

The SSA has committed to an expedited implementation of the Social Security Fairness Act:

• Retroactive Payments: The SSA began issuing retroactive payments in February 2025 to individuals who were previously affected by WEP and GPO. These payments compensate for past reductions in benefits, retroactive to January 1, 2024.
  
  

• Increased Monthly Benefits: Adjusted monthly benefit payments, reflecting the repeal of WEP and GPO, are scheduled to commence in April 2025. Beneficiaries can expect to see these increases in their regular Social Security payments.
  
  

Our advisors are available to assist with understanding how these changes impact you and claiming eligible benefits. 

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This material is intended to be educational in nature, and not as a recommendation of any particular strategy, approach, product or concept for any particular advisor or client.  This material is not intended as any form of substitute for individualized investment advice and social security planning.  The discussion is general in nature, and therefore not intended to recommend or endorse any asset class, security, or technical aspect of any security for the purpose of allowing a reader to use the approach on their own.  Before participating in any investment program or making any investment, clients as well as all other readers are encouraged to consult with their own professional advisers, including investment advisers and tax advisors. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will either be suitable or profitable for a client's investment portfolio. Munn Wealth Management, LLC, is registered as an investment adviser (RIA) with the United States Securities and Exchange Commission. Registration as an investment adviser does not imply any certain degree of skill or training.  1323GSG

Master Your Money: Why Tracking Every Dollar Matters

By Garrett Zimmermann

Mastering your finances isn’t about restriction—it’s about empowerment, giving you the freedom to spend intentionally and build a secure financial future. One of the most fundamental steps toward financial stability and success is tracking your spending. Whether you’re looking to save money, reduce debt, or build wealth, understanding where your money goes is crucial. Here’s why tracking your spending should be a priority:

1. Awareness of Financial Habits Many people underestimate how much they spend on non-essential items like dining out, entertainment, or impulse purchases. Tracking expenses provides a clear picture of spending patterns, helping to identify areas where adjustments can be made. This awareness is the first step toward making informed financial decisions.

2. Better Budgeting and Financial Planning Creating a budget is much easier when you have accurate data about your expenses. By tracking spending, you can allocate funds effectively, ensuring that essential costs like rent, utilities, and groceries are covered while also setting aside money for savings and investments.

3. Helps to Reduce Debt Debt can quickly spiral out of control if spending is unchecked. By monitoring expenses, individuals can pinpoint unnecessary costs and redirect funds toward paying off debts faster. Reducing debt not only improves financial health but also reduces stress and increases financial freedom.

4. Encourages Savings and Investment Without tracking spending, it’s easy to overlook opportunities to save or invest. When you keep an eye on your expenses, you can identify excess spending that could be redirected into an emergency fund, retirement account, or investment portfolio, helping to secure a better financial future.

5. Prevents Overspending and Financial Stress Living paycheck to paycheck can be stressful, and often, it’s due to a lack of financial tracking. Keeping records of expenses helps in preventing overspending and ensures that financial goals are met without unnecessary financial strain.

6. Helps Achieve Long-Term Financial Goals Whether it’s buying a home, starting a business, or traveling the world, long-term financial goals require careful planning. Tracking spending ensures that money is allocated wisely, bringing financial goals within reach faster.

7. Improves Financial Discipline and Control Developing strong financial habits is key to long-term success. When you consistently track expenses, you become more conscious of your financial choices, leading to better spending decisions and greater control over your financial future.

How to Track Your Spending

There are several ways to track spending, depending on personal preferences and technological comfort. Some effective methods include:

• Using budgeting apps like Rocket Money, YNAB, or PocketGuard

• Maintaining a spreadsheet with categorized expenses

• Keeping a spending journal or notebook

• Reviewing bank statements and categorizing expenses manually

Tracking/Budgeting Platforms

Many are overwhelmed with the idea of how they are going to track their finances. Below is a list of tracking/budgeting platforms that can transform your financial consciousness with a click of a button. Features like account syncing and automatic expense tracking take the stress away from learning your financial patterns. There are also many reports and insights you receive with these services that can help you make the best financial decisions for your situation and goals. Below is a list of some of the best financial platforms and what they have to offer:

Conclusion

Tracking your spending is a powerful financial tool that fosters awareness, discipline, and long-term financial success. By understanding where your money goes, you can make better financial decisions, reduce unnecessary expenses, and work toward a more secure and prosperous future. Start tracking your spending today and take control of your financial well-being!

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This material is intended to be educational in nature, and not as a recommendation of any particular strategy, approach, product or concept for any particular advisor or client.  This material is not intended as any form of substitute for individualized investment advice.  The discussion is general in nature, and therefore not intended to recommend or endorse any asset class, security, or technical aspect of any security for the purpose of allowing a reader to use the approach on their own.  Before participating in any investment program or making any investment, clients as well as all other readers are encouraged to consult with their own professional advisers, including investment advisers and tax advisors. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will either be suitable or profitable for a client's investment portfolio. Munn Wealth Management, LLC, is registered as an investment adviser (RIA) with the United States Securities and Exchange Commission. Registration as an investment adviser does not imply any certain degree of skill or training.  1323GSD

Smart Financial Moves for Young Professionals

By Garrett Zimmermann

Your 20s and 30s are the perfect time to lay the groundwork for a secure financial future. For millennials and Gen Z professionals, developing good money habits now can make all the difference in achieving long-term goals like buying a home, traveling, or retiring comfortably. By focusing on smart budgeting, diligent saving, and strategic investing, you can take control of your financial journey and build lasting wealth.

Smart Budgeting

1.      The key to budgeting starts with awareness. By tracking income and categorizing your spending (e.g., rent, groceries, entertainment), this awareness will reveal areas where you may be overspending, giving you an opportunity to cut back and redirect funds toward savings or other financial goals.

2.      Be realistic and flexible in your budget planning. Allocate money realistically based on your lifestyle while leaving room for adjustments if unexpected expenses arise. Review and update your budget regularly to stay aligned with your financial goals.

Diligent Saving

1.      Saving can feel overwhelming without a clear sense of purpose. Break your savings into both short-term and long-term goals. Short-term goals may include building an emergency fund or a special vacation, while long-term goals could involve saving for a home or retirement. This clarity helps you stay motivated and focused on your financial priorities.

2.      An emergency fund is crucial to protect yourself from unexpected expenses, such as medical bills, car repairs, or sudden job loss. Aim to save at least three to six months’ worth of living expenses in an easily accessible account. Having this cushion will give you peace of mind and prevent you from going into debt when life’s surprises occur.

3.      Living below your means is one of the most effective ways to accelerate your savings. Resist the urge to match your lifestyle to your income, and instead, prioritize saving and investing. The more you save now, the more you’ll have for future opportunities, whether that’s buying a house, traveling, or securing a comfortable retirement.

Strategic Investing

1.      Start early and invest regularly. The earlier you start investing, the more time your money has to grow. Even small contributions made consistently over the years can lead to significant wealth accumulation due to the power of compound interest. Make investing a regular part of your financial routine as it is a vital part of long-term success.

2.      Different types of investments carry different levels of risk. Understanding your risk tolerance—your ability and willingness to lose money in the short term for the potential of higher returns over time—is crucial. As a young professional, you can afford to take on more risk because you have time to recover from market downturns. However, it’s important to be honest with yourself about how much volatility you can comfortably withstand.

3.      Take full advantage of tax-advantaged investment accounts like 401(k)s, Roth IRAs, and traditional IRAs. Contributions to these accounts often come with significant tax benefits, either allowing for tax-deferred growth or tax-free withdrawals in retirement. Contributing to these accounts regularly can reduce your taxable income while boosting your retirement savings. Many employers also offer 401(k) matching, which is essentially free money—so be sure to contribute enough to capture the full match.

4.      Investing is not a "get-rich-quick" strategy. Markets will fluctuate, and there will be periods of downturns, but history shows that long-term investments generally grow over time. Keep a long-term perspective, avoid reacting impulsively to short-term market changes, and stick to your strategy. Regularly review your portfolio to ensure it aligns with your goals and adjust it if necessary, but avoid trying to time the market or chasing quick returns.

In your 20s and 30s, taking proactive steps toward smart budgeting, diligent saving, and strategic investing can set you on the path to financial freedom. By focusing on building a solid foundation now, you'll be well-positioned to achieve long-term goals like homeownership, travel, and a secure retirement. Remember, small consistent efforts today can lead to significant wealth tomorrow. With discipline, patience, and a well-executed plan, you can take control of your financial future and create lasting security for yourself.

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This material is intended to be educational in nature, and not as a recommendation of any particular strategy, approach, product or concept for any particular advisor or client.  This material is not intended as any form of substitute for individualized investment advice.  The discussion is general in nature, and therefore not intended to recommend or endorse any asset class, security, or technical aspect of any security for the purpose of allowing a reader to use the approach on their own.  Before participating in any investment program or making any investment, clients as well as all other readers are encouraged to consult with their own professional advisers, including investment advisers and tax advisors. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will either be suitable or profitable for a client's investment portfolio. Munn Wealth Management, LLC, is registered as an investment adviser (RIA) with the United States Securities and Exchange Commission. Registration as an investment adviser does not imply any certain degree of skill or training.  1323GSA

Maximizing Tax Savings by Bunching Itemized Deductions

By David Munn, CFP

As the year draws to a close, taxpayers aiming to reduce their 2024 tax liability may consider the strategy of bunching itemized deductions. This approach involves timing deductible expenses to maximize their tax impact in alternating years. Combining this with a donor-advised fund (DAF) for charitable giving can yield substantial tax benefits.

Understanding Bunching of Itemized Deductions

The standard deduction for 2024 is $14,600 for single filers and $29,200 for married couples filing jointly. Many taxpayers find their itemized deductions—such as state and local taxes (SALT), mortgage interest, medical expenses, and charitable contributions—fall below this threshold. Consequently, they opt for the standard deduction, leaving potential tax benefits from itemizing on the table.

Bunching deductions involves strategically consolidating deductible expenses in a single year to exceed the standard deduction. For example, instead of making charitable contributions annually, a taxpayer might contribute a larger amount every other year. Similarly, they might prepay property taxes or schedule elective medical procedures in the same year to maximize deductions.

Charitable Contributions and Donor-Advised Funds

Charitable giving is a key component of itemized deduction, and a donor-advised fund can enhance the effectiveness of a bunching strategy. A DAF is a charitable giving account where donors can make an irrevocable contribution, receive an immediate tax deduction, and recommend grants to charities over time.

When combining a DAF with bunching, taxpayers can make a substantial contribution in a single year, achieving several goals:

1. Immediate Tax Deduction: Contributions to a DAF are tax-deductible in the year they are made, allowing taxpayers to maximize their deductions in high-income years.

2. Flexibility in Giving: While the deduction is claimed in the year of the contribution, funds in a DAF can be distributed to charities over multiple years. This ensures consistent support for nonprofits even if contributions are made in larger, less frequent amounts.

3. Investment Growth: Funds in a DAF can be invested, potentially growing tax-free and providing more resources for charitable giving in the future.

Practical Application of Bunching and DAFs

Consider a married couple with $10,000 in state and local taxes (the maximum deductible amount), $8,000 in mortgage interest, and $10,000 in annual charitable contributions. These deductions total $28,000, just slightly below the standard deduction of $29,200. By employing a bunching strategy, they might contribute $20,000 (or more) to a DAF in one year, bringing their total deductions to $38,000. In alternate years, they take the standard deduction, optimizing their tax benefits over a two-year period, while they use the extra funds in the DAF to maintain their normal giving during the years the standard deduction is claimed..

Bunching may also be applied to medical expenses if they exceed 7.5% of adjusted gross income (AGI), though that is less common. 

Conclusion

Bunching itemized deductions and leveraging a donor-advised fund is a powerful strategy for taxpayers seeking to maximize tax efficiency while supporting charitable causes. With proper planning, this approach can help taxpayers reduce their tax liability, invest in their communities, and make a more significant philanthropic impact over time.

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This material is intended to be educational in nature, and not as a recommendation of any particular strategy, approach, product or concept for any particular advisor or client.  This material is not intended as any form of substitute for individualized investment advice.  The discussion is general in nature, and therefore not intended to recommend or endorse any asset class, security, or technical aspect of any security for the purpose of allowing a reader to use the approach on their own.  Before participating in any investment program or making any investment, clients as well as all other readers are encouraged to consult with their own professional advisers, including investment advisers and tax advisors. Munn Wealth Management, LLC, is registered as an investment adviser (RIA) with the United States Securities and Exchange Commission. Registration as an investment adviser does not imply any certain degree of skill or training.  1323GRZ

Protecting an Independent Spouse from Long Term Care Expenses

By David Munn, CFP

When a married couple faces the challenge of one spouse needing long-term care while the other remains independent and living at home, qualifying for Medicaid can be complex. Medicaid helps cover long-term care expenses, but it has strict income and asset limits. However, there are protections in place for the "community spouse" (the spouse living at home) to ensure they are not left impoverished while the other spouse receives care.

Understanding Medicaid’s Eligibility Rules

To qualify for Medicaid in Ohio (and most other states), an applicant must meet specific income and asset thresholds. For 2024, the spouse needing long-term care (the "institutionalized spouse") must have an income below $2,742 per month and countable assets of $2,000 or less. However, for a married couple, only the institutionalized spouse's income is counted, but the couple's combined assets are considered when determining eligibility.

Community Spouse Resource Allowance (CSRA)

To prevent the community spouse from becoming impoverished, Medicaid allows them to retain a portion of the couple's assets. This is called the Community Spouse Resource Allowance (CSRA). For 2024 in Ohio, the community spouse can keep up to $148,620 of the couple’s combined countable assets. These assets include cash, stocks, bonds, investments, and retirement accounts.

Certain assets, however, are exempt from Medicaid calculations, including:

- The primary home (if the community spouse lives in it)

- One vehicle

- Personal possessions, such as furniture, clothing, and jewelry

- Prepaid burial plans

Income Protections for the Community Spouse

Medicaid also provides income protection for the community spouse. If their income is below a certain threshold (about $3,715.50 per month in 2024), the community spouse can receive a portion of the institutionalized spouse’s income to ensure they can meet their living expenses. This is known as the Minimum Monthly Maintenance Needs Allowance (MMMNA).

Spend-Down Strategies to Qualify for Medicaid

If the couple’s combined assets exceed Medicaid’s asset limits, they must "spend down" those assets to qualify. There are several strategies available to help achieve this while still protecting the financial well-being of the community spouse:

1. Purchase Exempt Assets: The community spouse can spend excess assets on items that Medicaid does not count, such as home repairs, paying off debts, buying a more reliable car, or prepaying funeral expenses. This allows them to reduce countable assets while benefiting from these necessary purchases.

2. Annuities: A Medicaid-compliant annuity can convert excess assets into an income stream for the community spouse. By purchasing an annuity, the couple can reduce countable assets while ensuring the community spouse has a steady income. It’s important to work with a professional to ensure the annuity complies with Medicaid rules.

3. Spousal Refusal (in some states): Although not available in every state, spousal refusal allows the community spouse to refuse to support the institutionalized spouse financially. This shifts the Medicaid eligibility determination to the institutionalized spouse alone. However, Ohio does not currently allow spousal refusal.

4. Medicaid Trusts: Some couples set up irrevocable Medicaid asset protection trusts to transfer certain assets out of their name. These trusts allow them to preserve assets for their heirs while still qualifying for Medicaid. However, the assets must be transferred at least five years before applying for Medicaid to avoid penalties from Medicaid’s "look-back" period.

Conclusion

As in most areas of life, Medicaid planning is most effective when done in advance, especially outside of the five year “look-back” period. But even in emergency cases, there are options available to preserve assets and protect the community spouse. 

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 This material is intended to be educational in nature, and not as a recommendation of any particular strategy, approach, product or concept for any particular advisor or client.  This material is not intended as any form of substitute for individualized investment advice.  The discussion is general in nature, and therefore not intended to recommend or endorse any asset class, security, or technical aspect of any security for the purpose of allowing a reader to use the approach on their own.  Before participating in any investment program or making any investment, clients as well as all other readers are encouraged to consult with their own professional advisers, including investment advisers and tax advisors. Munn Wealth Management, LLC, is registered as an investment adviser (RIA) with the United States Securities and Exchange Commission. Registration as an investment adviser does not imply any certain degree of skill or training.  1323GRS

Planning for Long Term Care Expenses

By David Munn, CFP

One of the primary concerns for many retirees is the financial impact of an extended long-term care need. For starters, it is helpful to understand the safety net that is in place if you require long-term care in Ohio and run out of money, as there are several options and government programs that may assist. However, the process can be complex, and it’s important to understand how your finances will be affected and what resources are available to ensure you continue to receive care.

Medicaid as a Safety Net

Medicaid, a federal and state program, is the primary safety net for individuals who need long-term care but cannot afford to pay for it. In Ohio, Medicaid covers nursing home care, home health services, and other long-term care options. However, Medicaid has strict financial eligibility requirements, meaning you must deplete your assets to a certain level to qualify. This process is often referred to as "spending down."

Medicaid Spend-Down Process

In Ohio, for 2024, individuals applying for Medicaid must meet both income and asset limits to qualify for long-term care coverage. The income limit for an individual is $2,742 per month, and they cannot have more than $2,000 in countable assets. Countable assets include bank accounts, stocks, bonds, and certain retirement accounts. However, some assets, such as your home (if it is valued at less than $688,000 and you plan to return to it), one vehicle, personal belongings, and some burial funds, are excluded.

If your income or assets exceed these limits, you must "spend down" your assets before you can qualify for Medicaid. This means using your own funds to pay for your care until you meet Medicaid's eligibility requirements. During this period, many individuals exhaust their savings, sell non-exempt assets, or use long-term care insurance if they have it.

Transfer of Assets and Look-Back Period

One important aspect to be aware of is Ohio’s Medicaid "look-back" period. This rule prevents individuals from giving away or transferring assets to others to qualify for Medicaid faster. Ohio’s Medicaid program has a 5-year (60-month) look-back period. If you transfer assets for less than their fair market value within this period, you may be subject to a penalty, which delays your eligibility for Medicaid. The penalty is calculated by dividing the amount transferred by the average monthly cost of nursing home care in Ohio, resulting in the number of months you’ll have to wait before Medicaid will begin covering your care.

Home and Estate Recovery

If you own a home, Medicaid does not require you to sell it while you’re receiving care, as long as you intend to return to it or if a spouse or dependent is living there. However, after you pass away, Medicaid may seek to recover the costs of your care through estate recovery. This means that your home or other remaining assets could be sold to reimburse Medicaid for the expenses it covered. If your spouse or another qualified individual still lives in the home, estate recovery may be delayed until they pass away or no longer reside there.

Alternatives to Medicaid

In some cases, other options may help cover the cost of long-term care:

- Long-Term Care Insurance: If you purchased a policy before needing care, it can cover some or all of your long-term care expenses, potentially delaying or eliminating the need for Medicaid.

- Veterans Benefits: If you are a veteran, you may be eligible for benefits through the Department of Veterans Affairs to help with long-term care costs.

- PACE (Program of All-Inclusive Care for the Elderly): This is a Medicare and Medicaid program that helps seniors remain in their homes while receiving the care they need. It is new to Ohio in 2024 and will be gradually expanding throughout the state.

Conclusion

If you need long-term care in Ohio that will take a significant financial toll, Medicaid can provide essential support. However, qualifying for Medicaid involves spending down your assets and navigating complex rules, such as the look-back period. Planning ahead with various financial strategies can help protect assets, provide more resources for care, and ease the transition.

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This material is intended to be educational in nature, and not as a recommendation of any particular strategy, approach, product or concept for any particular advisor or client.  This material is not intended as any form of substitute for individualized investment advice.  The discussion is general in nature, and therefore not intended to recommend or endorse any asset class, security, or technical aspect of any security for the purpose of allowing a reader to use the approach on their own.  Before participating in any investment program or making any investment, clients as well as all other readers are encouraged to consult with their own professional advisers, including investment advisers and tax advisors. Munn Wealth Management, LLC, is registered as an investment adviser (RIA) with the United States Securities and Exchange Commission. Registration as an investment adviser does not imply any certain degree of skill or training.  1323GRM

The Trade-offs of When to Take Social Security

By David Munn, CFP

Social Security retirement benefits are a vital part of retirement planning for most Americans. Deciding when to claim these benefits can have significant financial implications, not just for the individual retiree but also for their spouse, particularly in terms of survivor benefits. There is no one-size-fits-all answer to the question of when to claim Social Security, as it depends on personal circumstances such as health, financial needs, and longevity expectations. However, understanding the tradeoffs between taking benefits early, at full retirement age (FRA), or delaying them until age 70 can help individuals and couples make more informed decisions.

Understanding the Basics of Social Security Retirement Benefits

Before diving into the tradeoffs, it’s important to understand the basic framework of Social Security benefits:

1. Full Retirement Age (FRA): The age at which you qualify to receive 100% of your Social Security retirement benefit. For people born between 1943 and 1954, the FRA is 66. For those born after that, it gradually increases, reaching 67 for those born in 1960 or later.

2. Early Retirement: You can start receiving Social Security benefits as early as age 62. However, claiming before your FRA results in a permanent reduction in benefits. For instance, if your FRA is 66 and you claim benefits at 62, you will receive 25-30% less per month than you would if you waited until full retirement age.

3. Delayed Retirement: If you wait beyond your FRA to claim benefits, your monthly benefit increases by approximately 8% per year, up until age 70. This is known as the delayed retirement credit. Claiming at age 70 could result in a benefit that is 24-32% higher than the benefit you'd receive at FRA.

Tradeoffs of Claiming Social Security Early

Claiming Social Security before your full retirement age (FRA) has some distinct advantages, but it also comes with significant drawbacks. Here are the main tradeoffs to consider:

Pros of Claiming Early

1. Immediate Income: One of the most obvious benefits of claiming Social Security at age 62 is that you start receiving money immediately. For retirees who need the income to cover living expenses or healthcare costs, waiting may not be an option.

2. Shorter Break-even Period: If you have a shorter life expectancy due to health concerns or family history, claiming benefits early may result in collecting more over your lifetime. The break-even point, where the cumulative benefits of waiting outweigh the benefits of starting early, typically occurs around age 80. If you expect not to live that long, starting early may be beneficial.

3. Flexibility for Personal Circumstances: Some retirees may wish to claim early and invest the benefits or use them for other financial purposes. Additionally, claiming early can allow greater financial freedom, especially if you're planning to reduce work hours or retire altogether before FRA.

Cons of Claiming Early

1. Permanent Reduction in Benefits: Claiming at 62 means permanently reduced benefits, potentially 25-30% less than what you’d receive at FRA. This reduction will affect your monthly income for the rest of your life, which may significantly impact your standard of living in later years, particularly as healthcare and living expenses rise. If you live a long life, this reduction could cost you hundreds of thousands of dollars. 

2. Temporary Reduction of Benefits if Still Working: Social Security places limits on how much you can earn from working if you begin benefits before your FRA. This is called the earnings test, and it applies until you reach your FRA. If your earnings exceed the limit for the calendar year, your benefits will be temporarily reduced.

Tradeoffs of Waiting Until Age 70 to Claim Social Security

Delaying Social Security benefits until age 70 can lead to larger monthly payments, but it also comes with its own set of tradeoffs. Let’s explore the pros and cons of delaying benefits:

Pros of Waiting Until Age 70

1. Maximizing Monthly Benefits: By waiting until age 70, you can increase your monthly benefit by up to 32% over what you would receive at FRA. This increase provides more financial security, particularly in the later stages of retirement when you might face higher healthcare costs or inflation. The higher monthly payments can make a significant difference if you live into your 80s or 90s and can act as a hedge against the financial risk of a long life, especially if you have concerns about outliving your savings or other retirement income sources.

2. Higher Survivor Benefits for a Spouse: One of the most significant advantages of delaying Social Security is that it increases the survivor benefits your spouse will receive after you pass away. If you wait until 70 to claim, your spouse’s survivor benefit will be based on the higher benefit amount. This could provide them with a much more comfortable income in their later years, especially if they outlive you by many years. This can be particularly important in situations where one spouse earned significantly more than the other.

Cons of Waiting Until Age 70

1. Delayed Gratification: The most obvious downside of waiting is that you have to delay receiving benefits for several years. If you need the income before age 70, waiting might not be feasible.

2. Longevity Uncertainty: If you pass away earlier than expected, you could end up receiving fewer total benefits over your lifetime. While delaying results in a higher monthly benefit, you may not live long enough to fully benefit from the increase. Individuals with poor health or shorter life expectancy may be better off claiming benefits earlier.

Conclusion

Deciding when to claim Social Security benefits involves weighing the immediate need for income against the long-term financial implications for both you and your spouse. While claiming early provides immediate access to funds, it results in a permanent reduction in benefits that can impact your standard of living and reduce survivor benefits for your spouse. Waiting until age 70, on the other hand, maximizes your benefit and enhances survivor benefits but requires delaying income, which may not be feasible for everyone. Ultimately, the best choice depends on individual circumstances such as health, financial needs, and life expectancy. 

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This material is intended to be educational in nature, and not as a recommendation of any particular strategy, approach, product or concept for any particular advisor or client.  This material is not intended as any form of substitute for individualized investment advice.  The discussion is general in nature, and therefore not intended to recommend or endorse any asset class, security, or technical aspect of any security for the purpose of allowing a reader to use the approach on their own.  Before participating in any investment program or making any investment, clients as well as all other readers are encouraged to consult with their own professional advisers, including investment advisers and tax advisors. Munn Wealth Management, LLC, is registered as an investment adviser (RIA) with the United States Securities and Exchange Commission. Registration as an investment adviser does not imply any certain degree of skill or training.  1323GRJ