Tag: Retirement

Social Security is the anchor of a retirement income plan

Past generations took little thought regarding how they would maximize their Social Security benefits. After all, it really didn’t matter how and when benefits were claimed if the retiree lived only a short time after retiring. Today, with the real possibility of living three decades without a job or paycheck, retirees need to do all they can to squeeze the most out of Social Security.

Over its almost eighty years of existence, Social Security has evolved. It now consists of hundreds of codes, and tens of thousands of pages of rules and regulations. Because of this, most eligible recipients do not understand the benefits they are entitled to receive. Consequently, there are millions of dollars of Social Security benefits left on the table each year.

While Social Security is complicated, it is essential to make informed choices regarding both when and how to apply. This will ensure you will get the most from the system. After all, you and your employers have contributed to this future source of monthly income since the day you started working. Understanding how the system works and creating an individualized plan to maximize this valuable benefit could mean the difference in hundreds of thousands of dollars of retirement income.

Five important benefits of Social Security:

1. Predetermined amount of income

By the time you come to the end of a career, your Social Security income amount is pretty well known. The benefit amount is based on both your earnings history and when you decide to apply for benefits. The accuracy of the benefit estimation makes it easy to build the rest of your retirement income plan around a reliable number.

2. Reliable income

Once you start getting Social Security benefits, the amount of income you will receive is set. It is highly unlikely that reforms to the system will cause benefit cuts.

3. Income that lasts for a lifetime

Social Security is one of the few sources of income that can be relied upon for a lifetime. It is an especially valuable benefit considering the long life expectancies of today’s retirees.

4. Inflation-adjusted income

Social Security benefits are increased each year based on the previous year’s inflation rate, which is measured by the consumer price index. These cost-of-living adjustments help retirees keep up with the ever-increasing cost of goods and services.

5. Survivor benefits

Although Social Security checks stop at the death of the recipient, monthly benefits can continue to be paid to surviving spouses and minor dependents.

The Sustainability of Social Security

There is a lot of misinformation that surrounds the sustainability of Social Security, but the boring truth is that Social Security is not going away anytime soon. Each year, the Congressional Budget Office (CBO) reports to Congress the fiscal status of Social Security. The latest report states that if no changes are made to the system, the Social Security Trust Fund, along with income collected from our taxes, will allow Social Security to pay all its obligations until the year 2034. If no adjustments are made to the Social Security system between now and 2034, there will only be enough money in the system to pay 79% of the promised obligations after 2034.

Minor adjustments to the system now could extend the viability of Social Security for years into the future. Raising the age requirements of future claimants, changing how the cost of living adjustment is calculated, or raising the maximum earnings subject to the Social Security tax are all viable measures that should be considered to strengthen Social Security. To date, these common-sense solutions have not been implemented because anytime a politician has suggested a change to Social Security it has proven to be a political boondoggle. Like any financial problem, the sooner the future projected shortfall is addressed, the easier it will be to manage. Making decisions about claiming Social Security benefits based on the false assumption that these benefits are disappearing is both dangerous and irresponsible.

With the ever-changing rules and regulations of Social Security, a list of commonly asked questions such as how much you can expect to receive, spousal benefits, and when to apply can be found here. The answers to these questions will frequently be updated to help you navigate the minor changes to the current Social Security system.

You can also visit the government Social Security website and select the ‘Retirement’ tab to receive assistance on things such as estimating your benefits, requesting a Social Security Statement, and applying for benefits online.

Social Security is responsible for 42% of today’s retirees’ income. While it does not provide enough income to retire on, it does provide a solid foundation upon which a sound retirement income plan can be built. A little time and effort can pay significant dividends when deciding when, and how, to receive Social Security benefits.

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