By Steve Conard, CFP®
Social Security has been the subject of intense debate in recent years as Baby Boomers begin retiring. Since its last major funding overhaul was enacted in the early 1980s, many more dollars have been paid into the system than were paid out in benefits, building up a surplus represented by IOUs from the US Treasury. In 2010 outlays began to exceed contributions (sooner than projected in 2016 due to the Great Recession), thus intensifying debate over the program’s future prospects for providing a reliable income source for retirees.
Apart from the politics of funding the Social Security program as a whole, however, lays the issue that is nearest and dearest to individual households – what role will Social Security benefits play in our personal retirement financial picture? The answer to this question is often less straightforward than the estimates provided to individual taxpayers by the Social Security Administration.
Benefit estimates are now available online at www.ssa.gov since the annual mailing of paper statements was discontinued in 2011 for people under age 60. Three estimated benefits are calculated – the amounts to be paid at age 62 (the earliest age available), at “full retirement age” (which varies based on birth date), and at age 70 (the maximum age at which benefits must commence). The longer one delays claiming their benefit, the larger the monthly payments will be.
But this set of estimates doesn’t tell the whole story. In fact, Social Security retirement benefits can be claimed based on the earnings history of a spouse, ex-spouse, or deceased spouse under certain circumstances, and may yield a larger benefit than those based on one’s own earning history. The rules also allow claimants to switch from claiming benefits against their own account to a spousal or widow’s benefit and vice-versa when doing so will result in larger payments.
Knowing the different claiming strategies can make a substantial difference in both monthly and lifetime benefit payments to claimants and their spouses. Knowing not only when, but how, to initiate claims is the key to maximizing benefits available under the law.
Our firm will host a community workshop to provide more details on available Social Security claiming options, and the factors to consider when developing a claiming strategy that makes the best sense on an individual household level. The workshop will be held at the Adel Public Library on January 30th from 1:00 – 2:30 PM and from 6:00 – 7-30 PM. It is open to the public, and admission is free.
Steve Conard is a CERTIFIED FINANCIAL PLANNER™ professional with Compass Financial Services, a registered investment advisor with offices in West Des Moines and Adel. Securities offered through LPL Financial, member FINRA/SIPC. Compass Financial Services is not an affiliate of LPL Financial.