If you search the Internet for the "future of social security," you will find yourself scrolling through a never-ending list of doomsday posts, with several predicting Social Security's possible demise by 2035. While it appears there may be a little over a decade to find solutions to maintain Social Security now, and for future generations, we all need to plan accordingly.
Even if Social Security becomes privatized, the payout is far from enough to maintain your current lifestyle. It's important not to rely entirely on Social Security for the whole of your retirement plan. Still, you are entitled to the benefits you have worked for and should consider how to optimize them.
Here are a few ways to optimize your Social Security benefits when planning for retirement.
Delay Taking Social Security
You are eligible to start taking your Social Security benefits at 62 years of age. That age may be appropriate for many people depending on their health, overall financial situation, and wanting to access Social Security before it ceases to exist. However, assuming Social Security remains, taking it at what is known as your Full Retirement Age (FRA) can increase the amount paid out. For instance, if your FRA is 67, but you start taking benefits as soon as you are eligible at age 62, your total payout decreases by 30%.
Achieve at least 35 Years of Work History
Social Security derives your payout based on your top 35 years of earning potential. If at 35 years of work history, you are still earning at a high rate over your lifetime, you may want to continue working. In doing so, the lower-earning years will fall off the total of your work history, increasing the baseline for your Social Security benefits.
Consider Spousal Social Security Benefits
Your plans for Social Security benefits should consider the amounts of both you and your spouse. For example, which of you made higher earnings over your work history? Social Security may enable you or your spouse to receive a payout based on the earnings of the higher paid individual. Also, you may be able to collect your spouse's benefit earlier and collect yours later as you continue to earn (this is called a “Restricted Claim for Spousal Benefits” now available only to those born on or before January 1, 1954).
The rules surrounding any government program, from taxes to Social Security, should all be part of your retirement plan. As the rules tend to change, you will need financial advisors to serve as your guide through the bureaucracy, so you can best optimize your Social Security benefits.
At Hapanowicz & Associates, we can help you to optimize both your Social Security benefits, as well as work toward your overall retirement plan. If you have any questions or concerns regarding your retirement plan or Social Security benefits, feel free to reach out to any member of our team at Hapanowicz & Associates. You can reach out to me directly at firstname.lastname@example.org.