Social Security – Will It Be There When You Need It?
Many are looking closely at retirement and trying to decide if now is the time. With the coronavirus pandemic still actively wreaking havoc, it has thrown a wrench into many people’s retirement plans. The market has been up and down, and there are so many other unknowns in our lives – Are schools opening, is it going to be e-learning or live? Can we travel? Is it safe to go out to dinner? Can I see my kids and grandkids? Will I always be working from home? What is going to be the new normal??
We do not know how long this craziness is going to last, and you want to avoid making any costly mistakes. One of the big decisions to make will be when to take your Social Security benefit. If you need the income to live, and you are at least age 62, the minimum age to begin benefits, the answer is obvious, but if you have enough money to cover your expenses until you are older, it could be to your advantage to wait.
Let’s take a look at how Social Security benefits work and what options you have. Three factors determine your Social security benefit amount:
- How much you have earned,
- What year you were born
- what age you start claiming benefits
The full retirement age varies based on when you were born. If you choose to take benefits at age 62, your monthly amount will be reduced by as much as 30% of your full retirement age (67 for anyone born after 1959) benefit. If, on the other hand, you wait until age 70, you receive delayed retirement credits, and you would receive your largest payout, an increase by as much as 40%! Obviously, the longer you wait, the larger your benefit will be. Still, there are other factors to consider – family longevity, current health, and if you are married, whether you or your spouse will file for spousal benefits. Spousal benefits allow a spouse who can’t claim benefits on their own to receive benefits at age 62 based on their spouse’s record. Also, if an individual was married for at least ten years and then divorces, they are eligible to collect spousal benefits on the earnings of their ex, as long as the recipient remains single.
Regardless of when you start taking benefits, one factor doesn’t change; whenever you begin benefits, you will receive them for the rest of your life. We do not know what the government will do with Social Security, but most likely, anyone receiving benefits will be grandfathered and should be able to maintain their current level of benefits regardless of what they may decide to do for future recipients. Based on what is going on in our country, with the most significant stimulus packages ever being passed by congress, it would be hard to believe that politicians will not start raiding the Social Security coffers.
We don’t know what the future will look like, so it’s important to position ourselves for a successful retirement. It’s vital to have as much flexibility as possible when it comes to your finances. If you have debt, you need to focus on paying it off, if you don’t have an emergency fund in place, consider making that a priority. If you have not accumulated cash in a safe vehicle that isn’t subject to market risk, now is the time to make some changes. Social Security isn’t a substitute for sound financial planning.
