March 7, 2018

WTOP Interview: 3 Costly Social Security Mistakes

LISTEN NOW! Find out how to maximize your Social Security and what are the mistakes you should avoid.
Dawn Doebler, MBA, CPA, CFP®, CDFA®, Senior Wealth Advisor

Interview Transcript:

Hillary Howard: 5:11. Maximizing your Social Security benefits can make a big difference in your retirement income, whether you're wealthy or just have modest assets. Deciding when to take those benefits though, can be complicated, leading a lot of us to make very costly mistakes.

Shawn Anderson: Well, joining us live to help us avoid these mistakes; Dawn Doebler, co-founder of Her Wealth and Senior Wealth Advisor at The Colony Group in Bethesda. Great to have you back Dawn! 

Dawn Doebler: Thanks Shawn!  

Shawn: What are some of the situations that make deciding when to take Social Security so complicated?

Dawn: Well Shawn, as you say, this is a complicated area because each situation is so unique, and I think the complexity in Social Security claiming, comes from really 2 main sources.

  1. First, the rules are complicated, and they differ due to a number of factors, such as your marital status, the number of years you've worked, salary earned each year, just to name a few.
  2. And the decision on when to claim also depends on those factors and many other things, like your health status, longevity, pension, other income, level of assets and their tax ability and some other things. And plus frankly, I think one thing that complicates matters, is people tend to have a personal bias on when they want to file. The terminology also can be confusing, couples want to understand both spousal benefits, which are used if both are living and survivor benefits, which are used if someone passes away. And there's a big difference in those benefit amounts. The spousal allow someone to claim half of the others benefits, whereas the survivor benefits usually provide 100% of the deceased persons benefits. 

Hillary: Let's talk about women for a moment and how women are affected when couples make retirement decisions based on their Social Security estimate?

Dawn: Well Hillary, everyone can get an estimate from ssa.gov and some people even have physical statements. And in our article, we talk about how you shouldn't bank on those Social Security estimates and here's why. Many people don't realize it, but if you're still working, that estimate assumes you continue to work and that you earn the same level of income until your full retirement age. So, if you retire earlier, your actual monthly benefit is likely to be lower than that estimate and that calculation really depends on your highest earning years. And the way this affects women, is if they become single breadwinners later in life and they often retire early during their peak earning years, so oftentimes they don't have 35 years of work and they may have zeroes in those calculations. And also they had a rule change in 2015, now a woman can only claim spousal benefits after the earning spouse begins receiving his own benefit.

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Shawn: Final 30 seconds here. What issues do couples run into when they decide the best age to take the benefits?

Dawn: Well Shawn, we often see disagreement between spouses and so this is where we think analyzing the numbers and the options can really help, so you can mediate those decisions and you can make sure that you have a full understanding of what the tradeoffs might be. Many people claim early at age 62 and that can be a mistake because your benefits are reduced by up to 25% for the remainder of your lifetime and it does affect spouse will and survivor benefits. And we're going to talk in the future about impacts on Social Security if you're divorced, remarried or widowed; those rules can be complicated, and women need to be aware of those as well.

Hillary: Alright, thank you so much Dawn. Dawn Doebler of The Colony Group in Bethesda. For more, go to wtop.com, search Her Wealth.

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Dawn Doebler, MBA, CPA, CFP®, CDFA®, Senior Wealth Advisor

Dawn’s experience spans more that 25 years providing wealth management, financial planning and corporate finance solutions for clients. As an MBA, CPA, Certified Financial Planner (CFP®), and a Certified Divorce Financial Analyst (CDFA®), she is uniquely qualified to understand the challenges and financial needs of clients from executives to entrepreneurs, as well as single breadwinner parents. Dawn is a weekly contributor to WTOP radio.