Wow, that’s a surprise!

I was surprised, shocked even, by what I learned in a continuing ed class on Social Security last week.  A large insurance company sponsored a Social Security study; we learned about it in the class and the survey results were a wake up!  This post will cover some of the key things you really need to know about Social Security. That company? Think whistling quarterback.

Let’s try a few questions to see if you can ‘test out’:

1. How many years of earnings are counted in your benefit calculation?
2. True or False – There are different claiming rules if you were born before January 2, 1954.
3. What is your full retirement age (FRA)?

Answers later.

Pig legs!

More precisely, prosciutto on the hoof, so to speak, at an grocery store in Florence, Italy.  Enjoy!

How important is it?

My first surprise, and I believe the insurance company’s also, was that approximately 25% of people think Social Security on its own will be enough for a comfortable retirement.

To avoid a bad retirement surprise, please consider that Social Security as your only retirement income source is too low for a comfortable retirement.  The official Federal poverty level for 2 is $16,460.  Per Business Insider, the average Social Security benefit is $1410/month. A couple who both receive the average benefit (total of $33,840) would be at approximately 200% of the poverty level.

A valuable, extremely underestimated, benefit

52% of respondents did not know that Social Security guarantees income for life.  Good news, it pays for life, and the life of your surviving spouse, if you’re married.

60% (I’m crying here) did not know that Social Security is protected against inflation. Social Security does have COLAS! (The cost of living adjustment kind, not the pop.) The inflation protection is my favorite part!

Honestly, life income with a COLA is a good retirement fact, or surprise if you did not know about it before.

How much per month?

The survey noted that 55% of people say Social Security will be their primary source of retirement income and they over estimate their Social Security benefit – per the survey, future retirees expect $1,628/month, while current retirees actually average $1,257/month. That’s about a $4,400/year difference and that is an amount that can change your lifestyle.

Avoid a bad retirement surprise and head over to my Social Security, order a benefits statement, and use their website tool to estimate your benefit.  Also, figure out how to remember the complex password they require you to have. (My ‘my Social Security‘ password requires both hands, my left little toe, and a llama to input. Not really, but it’s challenging.)

When will I collect?

The survey found that future retirees think they will collect Social Security four years later than the age at which retirees actually commenced their benefits. Collecting later = more money per month, collecting earlier = less money per month.

Avoid a bad surprise and plan when you will collect to achieve the best retirement income you can for your situation.  Many financial advisers have software tools to help you (and spouse if you have one) maximize your benefits.  I found one online that I was comfortable with, but if you’re not really into financial planning, you may want a pro to help you.

The answers

1. How many years of earnings are counted in your benefit calculation?

The highest 35 years, and if you don’t have 35, they average in zeros for the missing years.

2. There are different claiming rules if you were born before January 2, 1954.

True – if you were born before 1/2/54, you can take advantage of ‘file and suspend’.  Born after 1/1/54, no ‘file and suspend’ for you, as there was a bipartisan law change in late 2016 that eliminated this planning strategy.

Note – the law change did not change some claiming rules for people who are divorced but were married over 10 years to the former spouse.  The divorce claiming rules can be advantageous with planning.  If you are in this situation, you definitely need to learn about them and incorporate them in your Social Security planning.

3. What is your full retirement age (FRA)?

It depends! If you were born on or after 1943, it’s at least 66 and if you were born in 1960 or later it is 67.  You can find your FRA on the chart here.

Actions you can take include:

-Register on www.ssa.gov.

-Order your Social Security statement on www.ssa.gov.

-Go to www.ssa.gov and get a benefit estimate for when you believe you will retire.  Use it in your RIP.

-Consider how you will do your Social Security income planning and develop a plan that works best for your situation and constraints. Talk to your trusted financial advisor; the insurance companies they work with have Social Security software available for them to use for you.  Alternatively, check online for Social Security planning software you might like.

And if you have not seen the “Why you should read this blog…WIIFY” post, it’s here.

Questions, comments, or suggestions for retirement surprise areas you want to know more about?
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-Use ‘Contact’, above, to send an email.