CNS News– About 68 million Americans will get Social Security benefits every month in 2024. These benefits are a big source of income for people over 65. “A lot of people depend on their monthly Social Security checks to pay for things like food, utilities, and medical care in retirement,” said Loretta Kilday, a senior attorney at Debt Consolidation Care.
This safe money lets you pay for daily things. A lot of Americans depend on their benefits to cover their basic needs. But retirement should be the time to finally do all the things you’ve always wanted to do. worry about how you’re going to pay for them.
Experts say that you can use your Social Security to reach your retirement goals, which is good news. Here are the best tips they could give you for getting the most out of those funds.
Delay Your Benefits
David Brillant, a tax, trust, and estate lawyer at Brillant Law Firm, suggests delaying Social Security benefits to fund retirement. He said waiting until 70 rather than 62 or your full retirement age can significantly increase your monthly benefit. He said delaying Social Security benefits after the full retirement age raises monthly payments by 8%.
“This compound effect can generate tens of thousands of dollars in additional income over your retirement, which can be invested in diversified portfolios or real estate to build wealth.” Mike Kojonen, financial advisor and Principal Preservation Services owner, advises delaying and investing.
“This extra income can be strategically invested in the stock market or real estate to grow retirement savings.” He said you can use Social Security payments to cover basic retirement expenses and fund larger retirement dreams by timing them and integrating them with a good investment strategy.
Invest Your Social Security Benefits in Stocks
Ashley Vincent, financial expert and Home Investors owner, recommends investing Social Security benefits in stocks to build wealth. It’s important to consider your risk tolerance and investment goals, Vincent said. “Blue chip companies or index funds may be better for long-term growth than short-term gains.
“How much you could potentially gain depends on factors like how much you invest, what you invest in, and market performance.” If you invested $10,000 in a mix of stocks and added nothing more and saw a 7% annual return, you would have $25,000 after 14 years. Social Security benefits can be used to build wealth through stock market investing, but experts advise caution.
“First, it’s crucial to understand that Social Security is designed to provide a financial safety net during retirement, and investing always carries risks,” said BestDaily CFA Jonathan Rodgers. Before investing, people should secure their basic needs with Social Security.
Reinvest Into Well-Diversified Portfolios
“I’ve seen clients achieve remarkable success by reinvesting their enhanced Social Security benefits into well-diversified portfolios,” Kojonen said. “For example, one couple delayed their benefits until 70 and invested the extra money in index funds and dividend-paying stocks.” This gave them more financial security and a growing income stream, improving their retirement lifestyle, he said.
“This strategic approach leveraged the guaranteed increase offered by Social Security and capitalized on market growth,” Kojonen said. Rodgers agreed, saying that investing some of your savings or income in a diversified portfolio, including stocks, capitalizes on compounding.
He said, “Historically, the stock market has yielded an average annual return of around 7-10% “If an individual delays Social Security, contributing $10,000 annually to a well-managed investment portfolio returning 8% could yield $100,000 or more by age 70.”
He stressed that the stock market fluctuates and returns aren’t guaranteed. He recommends using professional financial advisors to create a customized retirement plan and investment strategy based on your unique circumstances.
Optimize Spousal Benefits
“Another strategy I’ve seen work well involves coordinating benefits for married couples,” Brillant said. He suggested delaying the higher earner’s benefits while the lower earner starts benefits earlier to maximize the couple’s benefit. “This can free up some immediate income for investment in tax-advantaged accounts or dividend-paying stocks or bonds, which can provide additional retirement income.”
Consider Tax Implications
“From my experience in tax law, it’s critical to consider the tax implications of your Social Security benefits and investment choices,” Brillant advised. He said knowing when and how to incorporate these benefits into your retirement strategy is as important as investing.
“For instance, restructuring your investments to benefit from long-term capital gains tax rates or understanding Social Security benefit taxation thresholds can preserve more of your wealth for retirement and investment.”
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Start Small but Stay Consistent
“Even $150 to $200 invested per month could turn into over $50,000 cash 20 years later,” Kilday said. Long-term investing compounds returns and multiplies savings through interest. “Social Security provides basic life support, but smart investing of surplus funds creates huge wealth to travel, help grandkids, and enjoy hobbies.
View Social Security income as a safety net that allows you to pursue more rewards through stocks and funds without running out of money. “If you have discipline, investing small bites consistently pays off very big later on.”