Are you planning your Social Security strategy? Social Security is a valuable resource, as it’s one of the few guaranteed income sources available for retirees. It will likely play an important role in your financial picture. But how much do you actually know about Social Security?
Below are a few interesting facts about the Social Security program. As you approach retirement, take time to research your Social Security options so you can make an informed decision about your benefits.
Nearly every retiree relies on Social Security. The Social Security Administration estimates that 9 out of 10 retirees rely on Social Security for income. Social Security isn’t just for retirees, though. In addition to providing income for 45 million retired workers, it also provides income to more than 10 million disabled workers and 6 million survivors.1
Many retirees count on Social Security for a large chunk of their income. According to the Social Security Administration, a third of all retiree income comes from Social Security benefits. Nearly half of all retired married couples and 71 percent of single retirees rely on Social Security for more than half of their income.1
Retirees are living longer than ever. Social Security started paying regular monthly benefits to retirees in 1940. At that time, a 65-year-old could expect to live for another 14 years. Today a 65-year-old is expected to live an additional 20 years. The number of retirees over age 65 is expected to increase from 49 million today to more than 79 million by 2035.1
Social Security increases your income to keep up with inflation. Social Security offers cost-of-living adjustments (COLAs) to help retirees keep up with inflation. However, the adjustment isn’t guaranteed and may not happen every year. In 2017 the increase was 2 percent. In 2016 it was 0.3 percent. There was no increase at all in 2015.2
Social Security COLAs have historically been lower than the inflation rate for health care. Social Security COLAs are based on the consumer price index (CPI). However, the CPI doesn’t account for the fact that seniors spend more on health care than the overall population. Thus, the CPI may not weigh medical costs in a way that’s reflective of retirees’ true costs. The result is that Social Security COLAs haven’t kept up with health care inflation in 33 of the past 35 years.3
There’s a cap on your Social Security benefits. The maximum Social Security benefit is currently $2,687 per month, but it’s adjusted regularly based on inflation. You probably don’t need to worry about the cap, though. The average benefit amount is just over $1,300 per month.3
The earliest you can file for benefits is age 62. Many people choose to file for benefits as soon as they’re eligible. If you file before your full retirement age (FRA), however, you could see a permanent reduction in your monthly benefit. Most people reach their FRA between their 66th and 67th birthdays. If you file before your FRA, your benefit will be reduced, perhaps as much as 35 percent.4
You can delay your filing past your FRA. You may wonder why anyone would delay their Social Security benefit. The main reason is because Social Security offers an 8 percent benefit credit for each year past your FRA that you delay your filing. The latest you can delay your filing is age 70. If your FRA is 66 and you wait until age 70, your benefit could increase as much as 32 percent.5
Social Security will start running deficits in 2020. We’re only a few years away from Social Security starting to run annual deficits. That means the program will pay out more in benefits than it brings in through payroll taxes. Without changes, the Social Security trust fund will be completely depleted by 2034.6
That doesn’t mean Social Security will end in 2034. It’s possible that Social Security could last to 2090 even if the trust fund is depleted in 2034. However, doing so may require a 21 percent cut in benefits across the board.
Ready to plan your Social Security strategy? Let’s talk about it. Contact us today at Stoll and Basler Financial Services. We can help you analyze your needs and develop a plan. Let’s connect soon and start the conversation.
Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.
The material is not intended to be legal or tax advice. The insurance agent can provide information, but not advice related to social security benefits. Clients should seek guidance from the Social Security Administration regarding their particular situation. The insurance agent may be able to identify potential retirement income gaps and may introduce insurance products, such as an annuity, as a potential solution. Social Security benefit payout rates can and will change at the sole discretion of the Social Security Administration. For more information, please consult a local Social Security Administration office, or visit www.ssa.gov
17846 - 2018/7/30
The year is halfway over. Have you met your savings goals so far this year? Are you behind on your savings for retirement? It’s easy to get behind on savings, especially when it comes to retirement, which may be years or decades in the future. After all, you probably have many other expenses and financial challenges that seem more urgent.
Fortunately, there’s still plenty of time left in the year to put away money for retirement. You may want to use qualified accounts to do so. These accounts, which include 401(k) plans and individual retirement accounts (IRAs), allow you to grow your funds on a tax-deferred basis. That means you don’t pay taxes on growth while the assets are inside the account.
Below are three commonly used qualified accounts and how they can help you save for retirement. You still have time left this year to ramp up your savings. Work with a financial professional to implement a savings strategy.
Planning for your own death isn’t a pleasant exercise, but it’s too important to ignore. That’s especially true if you have children or other financial dependents. Estate planning is a critical component of any financial plan because it helps you protect those you love after you pass away.
An estate plan provides formal, written instructions to your loved ones on how to manage your assets after your death. It may provide financial support to your beneficiaries and loved ones. It also may direct your heirs on how to split up your assets. In some cases, an estate plan helps you protect your assets should you become incapacitated because of cognitive disorders in the final years of your life.
Are you a millennial who hasn’t started saving for retirement yet? You have company. According to a new report from the National Institute on Retirement Security, two-thirds of people between the ages of 21 and 32 have nothing saved for retirement.1
Of course, you may not feel like retirement is an urgent priority. After all, you have decades left until retirement. You also may have more pressing financial issues, such as student loans, credit card debt or child care expenses.
While retirement may seem like an issue for the future, it’s wise to start saving today. Below are three reasons why it pays to start your savings plan in your 20s. A financial professional can help you develop and implement a savings plan.
Are you self-employed? If so, you may be living your dream. You set your schedule, run your business the way you like and answer to yourself. You may even get to earn income doing what you love. While self-employment can be challenging, it can also be greatly fulfilling.
Self-employment can present unique challenges, however, especially when it comes to retirement planning. While traditional employees can participate in their employer’s 401(k) plan or pension, self-employed individuals have to do it on their own. That can be a significant burden.
Since you work for yourself, you may believe that you can delay retirement as long as possible. However, that assumption may be incorrect. There’s always the risk that you could be forced into retirement at some point because of illness or injury. Or you may simply decide you want to pursue other activities. Should that time arrive, you’ll be far more prepared if you have a plan in place.
A recent study from the Transamerica Center for Retirement Studies found that the median retirement savings for millennials is $31,000.1 That amount may be a good start, especially if you’re just starting your career. However, given the challenges millennials will face in retirement, you’ll likely have to save a substantial amount over the remainder of your working years.
Millennials will face a number of difficult challenges. The first is simply life expectancy. People are living longer than ever, and life expectancy will only continue to increase as medical treatments evolve and advance. If you retire at traditional retirement age, it’s possible that you could live in retirement for 30 or even 40 years.
Are you one of the millions of Americans struggling with student loan debt? According to statistics from the Federal Reserve, Americans owe more than $1.4 trillion in student loan debt. That’s nearly double the aggregate credit card balance. More than 40 percent of Americans have student loans, and 11 percent of them are in delinquent status on those obligations.1
If you’re dealing with student loans, retirement may not seem like a high priority. That’s especially true if you’re decades away from retirement. You might feel urgency to pay off your student loans before you begin saving for the future.
Ignoring retirement could be a mistake, however. While retirement may be years away, that doesn’t make it any less of a priority. You may need to fund decades of living expenses in retirement. That kind of financial challenge requires a substantial amount of savings.
Are you approaching retirement? Have you developed a projected retirement budget? If not, now may be the time to do so. It’s an important financial tool that can help you manage your spending and preserve your retirement assets. You can use your budget to plan for a wide range of expenses, such as housing, utilities, taxes, travel and more.
One expense that should be included in your budget is health care. Many retirees assume that Medicare will cover all of their health care expenses. The truth is there are many medical expenses that aren’t covered by Medicare. In fact, Fidelity estimates that the average retired couple will spend $275,000 on out-of-pocket medical expenses.1 That figure doesn’t even include the cost of long-term care.
Risk management is always important, but it’s an even greater priority in retirement. Without the benefit of a regular paycheck, it could be difficult to bounce back from market downturns or costly emergencies. One sizable setback could be enough to derail your retirement plans.
One major risk you shouldn’t ignore in your planning is the impact of health care costs. Fidelity estimates that the average married couple will spend $275,000 on out-of-pocket health care expenses in retirement.1 That figure doesn’t even include long-term care, which can cost thousands of dollars per month and may be needed for several years.
The good news is there are steps you can take to reduce your risk exposure and protect your retirement. Below are three such steps to consider. If you haven’t yet developed your retirement risk management strategy, now may be the time to do so.
If you’re like most retirees, you’ve spent much of your career accumulating assets to fund your retirement. You’ll likely rely on those assets to generate a portion of your retirement income. While you will probably have Social Security income and possibly even a pension, you may also need income from your savings.
Even if you’ve saved a substantial amount for retirement, it can be difficult to know how much to withdraw each year. If you take too much, you could deplete your savings and put yourself in a challenging financial situation later in life. Take too little, and you may struggle to cover your living expenses.
A popular strategy is to take 4 percent of your savings balance each year as a retirement distribution. The idea behind this recommendation is that 4 percent is a modest amount that will allow your savings to continue to grow. It’s also a simple approach that makes it easy to plan your distributions.