Even if you don’t plan to rely primarily on Social Security for income in retirement, it’s still an important part of your retirement plan. Despite its importance, only 4% of retirees claim Social Security benefits at the optimal time, losing out on an average of $111,000 per household, according to a recent study.[1] You might have many worries in today’s world, especially when planning for retirement. But, when it comes to Social Security, focus on what you can control.
Is Social Security Recession-Proof?
While Social Security benefits aren’t affected by the stock market (unlike income from investments), it doesn’t mean the system can’t be affected by the COVID-19 pandemic. Increased lifespans and a declining birth rate were already putting a strain on the Social Security trust fund, which was projected to run dry by 2035.[2] But, after a period of increased unemployment and financial strain that can cause Social Security beneficiaries to claim benefits early, that date could change. The idea of temporarily cutting payroll taxes was even floated by the president recently.[3] Once the trust fund runs out, the Social Security system would only have funds to pay out about 75% of promised benefits.[4]
What Are Some Possible Solutions?
Those nearing and in retirement shouldn’t fear a complete disappearance of the program or a sudden benefit cut. However, it is possible that lawmakers will potentially either raise full retirement ages, increase taxes, or cut benefits to a degree.[5] A change could be something as subtle as getting smaller Cost of Living Adjustments to your benefit over the course of many years. Whatever the outcome, maximizing your Social Security benefit and minimizing your taxes should be part of your retirement checklist. The bottom line is that it’s important to focus on what you can control.
Focus on What You Can Control: Find Out What You’re Owed
How much you’ll receive from Social Security is important to know if you don’t want to leave your retirement income to chance. Luckily, it’s easy to find out how much you are owed. Over time, the Social Security Administration has slowly stopped mailing out most Americans’ Social Security benefit statements and instead encourages people to access their statements online. It’s important to check your earnings statement regularly to make sure you are getting credit for the taxes you’re paying into the system. To make an online account, either look for a letter with an activation code or go onto the Social Security administration’s website and use a valid email address to create a My Social Security Account. This way, you can check that your earnings history and paid Social Security taxes have been recorded accurately.
The best way to claim Social Security depends on your individual situation, and it might change if new laws regarding Social Security or taxes are passed. That’s why a professional helping you plan for retirement is just as important as the plan itself. We’re here to guide you not just to retirement, but through it. Sign up for a complimentary financial review to get started on your Social Security maximization plan.
[1] https://unitedincome.capitalone.com/library/the-retirement-solution-hiding-in-plain-sight/
[2] https://www.ssa.gov/policy/docs/ssb/v70n3/v70n3p111.html
[3] https://www.cnbc.com/2020/06/05/trump-wants-to-give-workers-a-payroll-tax-cut-how-it-would-work.html
[4] https://www.ssa.gov/policy/docs/ssb/v70n3/v70n3p111.html
[5] https://www.forbes.com/sites/davidrae/2020/07/28/will-coronavirus-or-politics-kill-social-security
