Your Social Security Benefits

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You are probably depending upon Social Security benefits for your retirement, but do you know much about it?  I can’t cover your Social Security options in one blog post, but here are a few key points you should know.  In this post, I cover several aspects of Social Security:

  • What does it going broke mean for you?
  • Will it cover your retirement needs?
  • What makes it so complicated?
  • What are the recent changes to “claiming strategies”?

What does it going broke mean for you?

Most people know that Social Security is going broke without changes to funding or benefits.  This is as much of a political as a retirement issue.  Just know that when the time comes, you and your political representatives are going to have to support some combination of lower benefits or higher funding.  We will hear plenty of demagoguery about this before we finally get a solution, but the key question is where the solution will fall on the spectrum of < = reduce benefits – increase funding =>.   This question will likely be answered by whichever party is in power when they finally decide to deal with this looming problem.  The key point for your retirement is that your retirement planning should not rely primarily upon Social Security benefits.  The earlier you start saving for retirement yourself, the better off you will be, regardless of what the politicians finally do.  This means automatically saving a set amount to either a 401(k) plan if offered by your employer or an IRA thru a financial institution if not.

Will Social Security Benefits cover your retirement needs?

The average Social Security check in 2016 is $1229 per month or $14,478 per year.  Will you be able to live on that amount for the rest of your life?  Perhaps some people can if they have no mortgage, rent, lavish car payment, or big medical bills.  However, for most people, I hope this is a wake-up call to make sure you save now for your retirement later.  So yes, I’m going to repeat myself.  The key point for your retirement is that your retirement planning should not rely primarily upon Social Security benefits.  The earlier you start saving for retirement yourself, the better off you will be, regardless of what the politicians finally do.  This means automatically saving a set amount to either a 401(k) plan if offered by your employer or an IRA thru a financial institution if not.  Find out what your estimated Social Security amount will be by using the estimator at the Social Security website.

What makes Social Security Benefits so complicated?

Social Security is so complicated because we have so many choices about when and how we can start getting it, especially for married couples where both are entitled to Social Security benefits.  There are plenty of websites and companies that will explain “claiming strategies” for you; I am only going to briefly highlight some issues.

  • You can start claiming Social Security benefits at any age after turning age 62, but the longer you wait, the bigger your benefit will be until the maximum at age 70.
  • Spouses can elect their own benefit or a spousal benefit from their spouse.
  • On average, women tend to have lower benefits, but live longer than men.
  • “Mixing and matching” the best combination of these claiming strategies for your family’s circumstances can be confusing.

What are the recent changes to “claiming strategies?

In 2015, legislation phased out two of these claiming strategies that involved filing and suspending one spousal’s benefit to let it increase, but still enable the other spouse to get a spousal benefit.  This is being phased out based upon your age, so you can read more about the details on the MSN-Money or Social Security websites.

Put this information into action this week.  Setup or increase automatic deductions from your paycheck to your company’s 401(k) plan or from your checking account to your own IRA account.  Many people start with small amounts, but increase it 1% every time you get a raise until you reach the 10-15% level.  The earlier you begin, the more thankful you will be in retirement, but it’s never too late to begin.

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