Q: I’d love to settle my mind. Most of my friends have already filed for Social Security benefits. They were worried it’ll eventually go away. But, my financial advisor continues to recommend that I keep waiting to file for mine. What are your thoughts?
I’d really like to give you a short-and-sweet answer. Unfortunately, without knowing your personal circumstances, that’s simply impossible. But, here are a few things to help guide your thinking.
Social Security isn’t going away anytime soon, in my view. For those over 55, the promised benefit shown on your latest Social Security statement is very, very, very likely to arrive in your bank account soon enough. Yes, that’s three “verys.”
How can I sound so certain? First, no politician wants to pull the rug out from under your planning that’s already in its later stages. Second, no politician wants to lose the votes of those who actually vote.
As your advisor likely explained, for every year you delay, you get an 8% lifetime benefit hike. Importantly, if your benefit is larger than your spouse’s, your surviving spouse will also enjoy your boosted benefit amount upon your death. As long as one of you lives for about 14 more years, each one-year delay is likely worth it. Naturally, this is a mortality question that only you can answer.
In addition, delaying your filing might open up tax planning opportunities while you wait. Uncovering them takes some detailed financial modeling. To name a couple, strategic Roth conversions and harvesting long-term capital gains come to mind.
Finally, to settle your mind, don’t forget that your friends may have very different financial circumstances from you. It’s never really safe to assume we’re all alike.
Q: Everywhere I look, I see more and more about investing in Bitcoin and other cryptocurrencies. It seems a lot of younger people now view them as legit investments. Yet, I don’t own any cryptocurrencies in my portfolio. Should I?
Over the past year, interest in cryptocurrency has certainly grown. If you ever tune into CNBC or read a financial publication, I’d bet real money that you’d hear about the latest wild moves of Bitcoin or Ethereum or whatever other crypto that sprouted up. It’s like crack cocaine for the financial media!
You can definitely put me in the camp of skeptics. It’s just far too volatile to be categorized as a reputable investment.
Bitcoin’s price fell about 40% in a span of months earlier in 2021. That drop was followed up with a price spike of 70% just a few months ago. Back in 2018, Bitcoin fell about 70% only to be followed by a quadrupling in early 2019.
As math geeks already know, while price surges of 70% and 400% seem exciting and lucrative, these moves only just recovered the 40% and 70% declines that came before them. It takes bigger gains to make up for losses. My advice is to turn down the volume on CNBC and think about something else.
Jason P. Tank, CFA, CFP® is both the owner of Front Street Wealth Management, a purely fee-only advisory firm and the founder of the Money Series, a non-profit program committed to providing open-access to financial education, for all. Contact him at (231) 947-3775, by email at [email protected] and at www.FrontStreet.com