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Financial Wisdom

"I make money using my brains and lose money listening to my heart." Kate Seredy, Hungarian-born children's book author and illustrator.

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Posted on 4/24/2012 8:30:26 AM

"The Rumors of My (Social Security) Death Have Been Greatly Exaggerated." Mark Twain

Regardless of what you hear, Social Security is not in imminent danger of going bankrupt. While the ‘demise of Social Security’ might play well in politics, it’s important not to be swayed by fear. It is vital to understand your benefit options, including how and when to start receiving them. Seeking help from a knowledgeable professional to maximize your Social Security benefits is essential. Making a wrong decision will last a lifetime. This is the first post in a series on Social Security.

Social Security Facts
Here are some facts from the May 2011 Social Security Brief No. 36, Social Security Finances: Findings of the 2011 Trustees Report published by the National Academy of Social Insurance[.pdf]:

  • Annual surpluses are projected to continue for the next 10 years and reserves are projected to grow to $3.7 trillion by the end of 2022. The Social Security system has enough funds to pay all scheduled benefits on time for more than a quarter of a century.
  • Funds will still be available to pay benefits after 2036. Assuming Congress takes no action between now and 2023, new revenues coming into Social Security and draw down on surpluses will still cover about 77% of scheduled benefits through the remainder of the 75-year period.
  • Social Security is strong in the near term and relatively modest changes (like increasing the FICA tax or increasing the retirement age) can bring it into long term balance over the next 50 and 75 years.

Social Security Features
Today more than 55 million people receive Social Security benefits. Here are the many features this benefit offers:

  • Income You Can’t Outlive: This is (or will be) one of few sources of monthly checks that will continue to come for as long as you live.
  • Benefits That Don’t Go Down: Unlike other retirement plans where you may have to draw down the principal to sustain income, Social Security benefits generally will not decrease once you've qualified for them.
  • Inflation Adjusted Benefits: Even though they did not increase the last two years, Social Security benefits typically are protected from inflation and the government annually declares a cost of living adjustment to benefits.
  • Spousal and Dependent Benefits: If you have a non-working spouse or dependents and they don’t otherwise have their own benefits, they can get half of your benefits.
  • Survivor Benefits: Even though your Social Security checks stop after your death, in general, benefits may continue for your spouse or dependents, depending on your situation.
  • Death Benefit: While very small, Social Security also gives your survivor a death benefit of $255.

Many people are concerned about outliving their retirement income. As people are living longer, it’s likely that some will. Even though Social Security is one resource that you cannot outlive, to maximize your retirement savings it’s critical to develop an integrated and forward-looking strategy. Relying on one asset (Social Security), without considering the impact on the other (savings), could be the difference between having enough money in retirement versus falling short.

In our next post, we’ll look at how Social Security eligibility is determined and steps you can take to protect yourself from being underpaid.

To learn more about how to maximize your Social Security benefits, while enhancing and guaranteeing the value of your other assets, contact me today.

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