The Social Security Administration has announced that the future of Social Security is in jeopardy and unknown. Whatever the future holds, we do know that it will affect your retirement and how you should plan for the future.
The Social Security Administration announced that if nothing is done, tens of millions of Americans will only receive about three-quarters of their Social Security benefits when they retire. Social Security trust funds, which hold the money not needed for the current year are expected to be depleted by 2035.
Americans today are living longer and having fewer kids, leading to people collecting Social Security for longer time periods. In addition, there are not as many workers paying into the fund today as in previous years. In 2018, Social Security had to tap into its trust funds for the first time and will continue to do so in order to keep up with the current obligation until the trust fund accounts are depleted. All of this leads to the future of social security being unknown.
At Dewitt & Dunn Financial Services, we educate our clients on the belief that we don’t know exactly what Social Security will look like in the future. As a result, the retirement plans we create do not heavily rely on Social Security income. Our strategies focus on creating lifelong income from multiple different sources.
The best way you can make the decision on when to start claiming your Social Security benefit is to educate yourself on the different age options available. The full retirement age for benefits used to be 65, but it has increased for most people and is now somewhere between the age of 66 and 67.
You have the ability to start collecting benefits as early as age 62, however, your benefit will be permanently reduced should you choose to claim it that early on. There are a couple of situations where claiming benefits at age 62 may actually be right for you.
You will get your full benefit if you claim at your Full Retirement Age (FRA). If you can wait until age 70, your benefit increases by as much as 8% each year. To be sure you have a solid plan that will get you the most value out of your Social Security benefit, work with your financial advisor to come up with a Social Security strategy before you turn 62.
Your decision not only affects you, but also your spouse. If one spouse passes away, the surviving spouse is eligible for their partner’s benefit if it’s higher than what they are already receiving.
Many couples don’t realize that a divorced spouse can also qualify for part of their ex-spouse’s Social Security benefit if their marriage lasted at least 10 years. The divorced spouse must be at least 62 or older and unmarried before he or she can file a claim.
Here’s the tricky part — if you’re unmarried and your ex-spouse is remarried, you can still file a claim on his or her benefits. If you remarry, however, you typically cannot collect benefits on your ex-spouse unless your latter marriage ends. The amount of benefits you get has no effect on the amount of benefits your ex-spouse or their current spouse may receive.
Social Security is only designed to replace about 40% of your income, and most people will need at least 80% of their pre-retirement income to maintain the lifestyle they want in retirement.
There is no one-size-fits-all solution that will work for everyone. At Dewitt & Dunn Financial Services, we recommend sitting down with a financial professional and talking through all the options available to your specific situation.
The bottom line is, you don’t have to take Social Security just because you’re retired. However, you should have a plan in place when the time comes to ensure you have enough money to keep going.
Still have lingering questions about the future of social security? That’s what we’re here for. Give the team at Dewitt & Dunn Financial Services a call today and schedule a time to sit down with one of our advisors! Our experts can make sure you have a tailored strategy for claiming your Social Security benefit and creating a plan that allows you to live out your retirement years with a financial plan tailored to your goals.