6 Steps You Can Take With Your Social Security Policy Before Summer Ends

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6 Steps You Can Take With Your Social Security Policy Before Summer Ends

Summer is usually a quiet time for stocks, when the Federal Reserve “goes quiet” and freezes its economic guidance between the mid-June and late September policy meetings. That window is a good time to take stock and review your Social Security strategies. Let’s review six simple steps you can take to prepare for those goals before summer ends.

1. Get your ducks in a row

The first thing you should do is go to ssa.gov and download your latest Social Security Statement. You should check that your top 35 years of benefit — which are used to calculate your basic benefit — have been accurately recorded. Any missing or incorrect data can reduce your benefits.

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2. Maximize your Social Security benefits

If you start claiming your Social Security benefits at age 62, your monthly benefits will be permanently reduced by up to 30%. You can only get the full benefit if you start applying after your full retirement age (FRA) which is 66 to 67, depending on the year you were born.

For each year you wait after your FRA starts claiming benefits, you’ll get a permanent 8% increase until you’re 70.

So, it’s a good time to review all of your liquid assets to see if you can cover your living expenses during the “bridge” years between your 62nd birthday and your FRA. If you don’t, it may be the right time to sell some of your illiquid assets or allocate more of your portfolio to income-producing stocks or fixed income investments.

3. Weigh your portfolio against Social Security benefits

For most retirees, it’s usually best to wait until age 70 to start claiming Social Security benefits. But if you have a high net worth or low life risk on your assets, claiming your benefits early at 62 or FRA can reduce your reliance on your stock and bond portfolios.

So instead of closing stocks or bonds during market downturns to free up more cash, you can rely on your Social Security benefits and allow your portfolio to recover and grow. By allowing your valuable investments to be consolidated, you can leave your heirs a large legacy.

4. Re-evaluate your stock portfolio

Speaking of your stock portfolio, it’s possible that recent AI-driven gains in the technology and energy sectors have caused some of your top stocks to deviate from their target allocations. So, it may be time to rebalance your portfolio by pruning some of those winners.

If you are nearing retirement and no longer want to manage your portfolio, it may also be a good time to switch to passively managed ETFs such as Vanguard’s S&P 500 ETF (NYSEMKT: VOO). So, you can still be exposed to the S&P 500 — which has produced an average annual return of 10% since its inception — and not worry about individual stocks.

5. Increase your hosting contributions

Relying heavily on Social Security checks is also a risky long-term strategy, as many analysts expect a sharp decline over the next decade. The Committee for a Responsible Federal Budget, a Washington fiscal watchdog, recently warned that the federal government could cut the average Social Security retiree check by $500 by 2032 to cut costs.

If that happens, retirees will have to rely more on their IRAs, 401(k)s, and other retirement accounts. After age 50, you’re allowed to make catch-up contributions — that exceed your normal annual limits — to those accounts. Those limits vary by type of retirement account, but ranged from $1,000 to $7,500 last year.

So if you’re over 50, have a few years left before retirement, and have a lot of money you’d like to put away, it’s a good time to take out those catch-up contributions.

6. Compare your claims with your spouse

If married, the higher-earning spouse should try to delay their Social Security claims until age 70 to maximize their benefits. If the spouse dies first, then the surviving spouse can claim those higher benefits for life, even if they are not yet 70 years old. So, a little planning today can go a long way tomorrow.

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Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions and recommends the Vanguard S&P 500 ETF. The Motley Fool has a policy of disclosure.

6 Steps You Can Take With Your Social Security Strategy Before Summer Ends was originally published by The Motley Fool