By Byron Moore
Q: Should I plan on Social Security being there for me when I retire?
A: Yes, if you are a worker covered by Social Security, you’ll receive a monthly income from Social Security when you retire.
How much? That depends on how much you earn during your working years and how well the government can manage the ever-escalating costs of delivering these benefits.
In prior columns I’ve discussed the financial problems of Social Security, which can be summarized as “too few workers, too many retirees.” The plan isn’t going to go broke – but neither can it continue as promised. Either taxes are going up, or benefits are going down…or maybe some of both.
When that will happen is anybody’s guess – it’s been a can both political parties have kicked down the road for decades. And there’s probably enough wiggle room left to kick it down the road a few more years yet. But one day…
What doesn’t need to be put off is doing everything you can do to maximize your own Social Security benefits. Here’s how.
Know your numbers. The Social Security Administration has an easy to navigate website (www.ssa.gov) that allows you to obtain an estimate of your Social Security benefits. Obviously the closer you are to retirement the more accurate these benefit projections will be. This is the best place to start to get a feel for the benefits Social Security will offer you.
The website gives you an option to print your four-page Social Security Statement or save it to your computer. Do this as you’ll need this information for the next step.
Evaluate your choices. Once you get your Social Security Statement, look on page two under “your estimated benefits.” This section reports three options for you. First, it gives you a monthly retirement income figure assuming you retire at your “normal” retirement age (NRA). For anyone born in 1960 or later, Social Security sets that at age 67.
If you postpone taking your Social Security benefits until age 70, you’ll see that the benefits rise significantly (8% per year until age 70). That number will be reported to you on the second line.
Finally, your personalized report from Social Security will show you how much your benefits will be decreased if you decide to take them as early as possible, which in most cases is age 62. Likewise, benefits are decreased by 8% per year for each year you take them early. That shows up on line 3.
Here’s where some careful thinking is called for. I’ve seen too many folks simply decide to take a check as early as possible, not realizing the future benefits they are giving up. That can put pressure on other retirement savings to produce income, perhaps at a greater rate than is prudent for someone who wants their money to outlast them.
Fill the gaps. For married couples, Social Security will provide income for both spouses. For non-working spouses, a benefit equal to half of the working spouse’s benefit is paid. So if a working spouse is entitled to $2000 per month in benefits, a non-working spouse would get an additional $1000 per month.
If both spouses worked, both would receive their respective benefits. To borrow from the above example, assuming equal working incomes, both would receive the $2000 per month income from Social Security.
But what happens when one of the spouses dies? When a spouse dies, their benefit stops. To continue the above examples, if one of the two working spouses dies, that spouse’s $2000 per month income stops. If only one of the spouses had been working, the surviving spouses would be allowed to continue receiving the $2000 per month income, but the smaller spousal benefit income ($1000) would stop.
Remember, these figures will vary based on your specific work history and facts.
Too many people get surprised by how dependent on both checks they’ve gotten and how dramatically the loss of that monthly income affects the survivor’s financial security.
How will you fill these gaps, either for yourself or for someone you leave behind?
Get started now. There is no one-size-fits-all answer for determining when to begin taking your Social Security benefits and how to fill the gaps due to loss of benefits when one spouse dies.
You’ll need to coordinate all these issues with your personal retirement planning. Most will need to help of an experienced professional acquainted with the issues.
No one can predict how much of Social Security will “be there” for us when we retire. But however much that is, it’s up to you to make the most of it.
And the time to start is now.