Social Security as a Safety Net?
For those of us who have been paying into Social Security since the beginning of time (or, more accurately, when we got our first job at age 16), we put high hopes into the promise of social security as part of the trusted “three-legged stool” for our retirement.
However, the trustworthiness and reliability of Social Security payouts has been challenged since its inception. Perhaps some of these headlines jog the memory of distrust and disillusionment of the program:
The Future Financial Status of the Social Security Program — Chief Actuary of the Social Security Administration. Social Security Bulletin, Vol. 70, No. 3, 2010
Social Security Is Staring at Its First Real Shortfall in Decades — The New York Times, June 12, 2019
The Real Problem with Social Security — Forbes, April 23, 2019
Don’t believe this myth about Social Security — MarketWatch May 31, 2019
Six More Myths about Social Security — AARP 2016
Social Security’s Trust Funds Could Run Dry in 2035. Here’s Why That’s a Big Deal. — The Motley Fool April 21, 2020
And the very latest blow to Social Security based on the current economic status:
Opinion: Coronavirus May Deal the Final Blow to Social Security and Medicare — MarketWatch April, 28, 2020
It seems we can’t win when it comes to our hard-earned money and required payments into the Social Security system.
With headlines like these, many citizens feel Social Security won’t be available when they are ready to retire. Similarly, many feel they we will never be able to retire. What do you believe?
As a low earner most of my employment years, a stay-at-home parent during a majority of those years, and a divorcee, I did not hold out much hope for a helpful Social Security payout. The latest review of my Social Security statement shows an estimated benefit at full retirement age (FRA) of 67 to be less than $300/month.
Yikes!
Of the other legs of the stool, I have my savings and investments to rely on, but no pension. Everyone’s story is different yet it’s a situation many near to or approaching retirement wonder and worry about.
Recently I connected with Jim Blankenship, CFP, and author of the 5-book “Owner’s Manual” series:
- A Social Security Owner’s Manual, 2020 4th Edition
- A Medicare Owner’s Manual, 2020 1st Edition
- An IRA Owner’s Manual, 2020 3rd Edition
- A 401(k) Owner’s Manual, 2020 1st Edition
- Social Security for the Suddenly Single, 2017
I read Social Security for the Suddenly Single based on a discussion with Jim and his recommended reading following that conversation.
The book, at a mere 90 pages, manages to cover the confusing, complicated, and hopeless feeling many of us feel related to our finances, retirement, and what role Social Security will play in our future.
Although the book is brief, it took me almost a month to read. Why?
- I read during homeschooling my granddaughter—a huge distraction and grand task all by itself!
- The book was brief but in-depth and needed my dedicated attention to fully understand the concepts outlined.
Two readings later (the second being straight-through and undisturbed), I am much more confident about my benefits, the process, and expectations. I can breathe a sigh of relief about the safety net that Social Security offers me.
What the book delivers:
Jim covers the terminology and acronyms you’ll get to know as you prepare for retirement, or initiate your Social Security benefits. These include but are not limited to:
- Full-Retirement Age (FRA)
- Primary Insurance Amount (PIA)
- Windfall Elimination Provision (WEP)
- Government Pension Offset (GPO)
- Delayed Retirement Credits (DRC)
You’ll get the scoop on age requirements and reductions, plus the primary benefits you may qualify for:
- Your Own Retirement Benefit
- Spousal Benefits
- Parent’s Benefits
- Survivor Benefits
Charts and calculations support the points above. For instance, you’ll get a view of what percentage of reductions to expect when you file before your FRA. Similarly, you’ll understand how delaying your application increases your monthly benefit.
Lastly, as this book highlights the Social Security considerations regarding divorce, the author includes a Divorcee Benefits Matrix. This chart provides a convenient overview of benefits, reductions, and other useful information to help readers visualize where they stand with Social Security benefits as a divorcee.
Beyond building awareness of the Social Security process, there are two steps to take to be proactive about your earnings and benefits:
- Visit the Social Security website at socialsecurity.gov and create your account. Once your account is created, or if you already have an existing account, make it a yearly habit to review your earnings records. If you find discrepancies, refer to your IRS tax records for that year and contact your local Social Security office to make corrections.
- Schedule regular check-ins and conversations with your financial planner. He or she can offer an additional level of knowledge and expertise to keep your retirement plans and finances in order.
What’s your view of Social Security? Do you still have questions? If so, I recommend Social Security for the Suddenly Single. To read more about social security, IRAs, and other financial topics, visit Jim on his website, Financial Ducks in a Row or at Blankenship Financial Planning. (No obligation. No affiliate. Just solid, helpful information.)
Kristen
photo credit: Stuart Miles at freedigitalphotos.net
Social Security can pay a surprisingly high amount under the right conditions. When my wife and I start taking it in a few years the government estimates we will receive $5,500 per month because I contributed the max amount for the entire 35 years of my career. Ironically we don’t need it at but I’ll certainly take it.
That’s fabulous, Steve! This also supports the necessity to plan in advance. I like that you contributed the max amount from the start, which means there are plenty of ways to plan, save, and invest for the future. Thank you for contributing!