If you're planning for retirement, there's one thing you should do before claiming Social Security benefits. Meet with a financial advisor. Even if you've never met with an advisor before, that's OK. Many work on a fee-only basis, meaning you don't have to marry yourself to one.
And if you're worried that you don't have enough money to "waste an advisor's time," banish that thought. It doesn't matter how much money you're entering retirement with. The goal is to ensure that the money you have lasts.
You can find a fee-only fiduciary by visiting The National Association of Personal Financial Advisors (NAPFA) website at napfa.org. It's important to work with a fiduciary. A fiduciary, by law, must make suggestions for your benefit rather than their own. In other words, you're looking for someone who puts your needs first.
Here's why it's so important to meet with an advisor before claiming Social Security.
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An advisor can tell you if you're claiming at the right time
As an impartial party, an advisor can look at your total assets and help you determine if you're claiming at the right time. They can let you know if you're leaving too much money on the table by retiring early or if you've "over-planned" and could have retired years ago. If you're too young to claim Medicare, a tax advisor may be able to help you find an alternative source of medical coverage in retirement. A financial advisor will also tell you how long your benefits are likely to last and if you'll have enough money to carry you through retirement.
An advisor can explain how Social Security benefits will impact your overall tax bill
The bite taxes take out of Social Security often comes as a surprise to people. An advisor can tell you how much you can expect to pay in taxes once you factor in other sources of income, such as withdrawals from a retirement account.
An advisor can come up with a strategy that minimizes taxes on your benefits (and other sources of income)
Once you add up Social Security benefits, money from your retirement account, and any other sources of income, you may be surprised by the amount of money you're working with. No matter how much that adds up to be, a financial advisor can help you develop a solid withdrawal strategy that gives you access to the amount you need each month without pushing you into a higher tax bracket.
A financial advisor can help you create a realistic post-retirement budget
Retirement isn't the end of anything. You'll still have dreams and things you want to accomplish. You'll still have places and people to visit. To accomplish everything you want in retirement, you need a realistic budget. A good financial advisor can help you develop a budget you can stick with.
If you're getting close to retirement, congratulations! Before you claim Social Security benefits, though, take the extra step of meeting with a financial advisor to ensure all your ducks are in a row.
