Broker Check

Monday Money Report

| January 22, 2024

Friday the market hit an all-time high, largely led by technology companies. We have a busy week of quarterly earnings reports ahead, as well as the release of data around fourth-quarter economic growth and the Fed’s preferred inflation metric. Regardless of what this week holds, we’re a little ahead of where we were two years ago, with the previous all-time high coming on January 3, 2022.

Another thing that has climbed is Social Security’s Full Retirement Age, or FRA. When Social Security began in 1935, life expectancy in the US was around 58 for white men and 65 for white women.  Minorities were even lower. Social Security was intended to provide additional support for people who lived longer than average. As life expectancy has increased, the start of Social Security benefits has not changed proportionally.  In 1983, Congress did begin to gradually increase the FRA to age 67.

You can receive benefits as early as age 62, and surviving spouses can claim benefits as early as 60. Doing so raises two concerns. First, every year you claim benefits before you turn 70, your monthly payment is reduced by about 8%. Second, if you claim benefits before your Full Retirement Age and you are still working, your Social Security payments will be reduced.

Many people I talk with don’t understand this connection.  The Social Security Administration doesn’t care when you retire, or stop working, or if you consult, or work part-time. You can claim benefits and still work full time; however, if you have not reached your Full Retirement Age and you make over $22,320, your benefits will be reduced by $1 for every $2 you earn over the limit. For example, you claim benefits and then begin consulting.  If you make $42,320, you are $20,000 over the limit.  Your Social Security will be reduced by $10,000.  

If you find yourself in this position, you do have the option of suspending benefits, then restarting them later.  Your benefits will continue to grow during this time.  Once you reach your Full Retirement Age, you can earn an unlimited amount and still draw your full Social Security benefits.

When to start benefits involves more than just when you stop working or reach your Full Retirement Age.  Talk with your financial advisor about the right timing. If you have enough assets, or a pension, you may want to delay taking Social Security until age 70, to receive the maximum monthly payment. Conversely, you may want to take benefits as soon as you stop working, if the extra money allows you to travel or do other things while you are still young and healthy.

If you’re married, it's also important to consider your spouse. You may want a claiming strategy that protects a lower-earning spouse or supplements pension survivor benefits.  If you’re divorced, but were married for at least ten years, you’re still entitled to spousal benefits; make sure you notify the Social Security Administration of your marriage when you start benefits.   

Your action item this week is to check your tire pressure. Properly inflated tires wear better and are safer.

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CovingtonAlsina is a registered investment adviser.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies.  Investments involve risk and, unless otherwise stated, are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.