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Caring For Generations

Social Security From an Estate Planning Point of View

by | Apr 19, 2023 | retirement and estate planning, social security

Waiting until age 70 to claim Social Security benefits can result in being able to leave a larger legacy for one’s heirs, a study published in the Journal of Financial Planning Research Quarterly shows.

While investment and tax planning are not areas in which our attorneys at Geyer Law offer advice, when it comes to Social Security, we help our estate planning clients make decisions about both lifetime and post-death gifts and inheritances. Social Security benefits – as well as the tax that must be paid on those benefits – need to be taken into account when clients contemplate gifts and legacies to both heirs and charitable causes.

“Few would disagree that Social Security is a valuable retirement income source, even for affluent and high net worth retirees,” authors Wade Pfau and Steve Parrish state, admitting that for those:

  • with legitimate medical reasons to project a shorter longevity
  • who have need to access income sources right away,

claiming benefits at Full Retirement Age might be the best decision. However, given that Social Security benefits are:

  • inflation-adjusted
  • government-backed
  • provide survivor benefits,

the arithmetic is compelling in favor of deferral. For those with a Full Retirement Age of 67, the monthly benefit would be 24% larger by delaying to age 70. (A 2021 study by Diffy, Finke, and Blanchett showed that even were there to be a 21% reduction in future Social security benefits (due to depletion of the trust fund), delayed claiming increases retirement wealth.)

Recognizing that Social Security benefits play an important role when it comes to making estate planning and gift planning decisions, at Geyer Law we often work in cooperation with many of our clients’ tax and financial planning advisors. Our goal is to help clients prioritize their goals for themselves as well as for their heirs.,

– by Ronnie of the Rebecca W. Geyer blog team