There has been a lot of discussion lately around Social Security
and the safety of retirees’ benefits.
Below we answer two important questions: how can I figure out
how much will I get in monthly Social Security payments and will
Social Security be around for my retirement?
Estimating your future Social Security benefits used to be a
difficult task, but not any longer. For an estimate of your
projected benefits, go to www.ssa.gov/estimator. The retirement
estimator gives estimates based on your actual Social Security
earnings record. The first step is to create your personal Social
Security account.
The website form will ask you for a number of facts, including
your name, Social Security number, date and place of birth, your
mother’s maiden name, additional information you provide about
future earnings, and the age at which you expect to stop working.
Based on this information and your actual earnings history as
maintained by the Social Security Administration, the Retirement
Estimator generates an estimate of the amount you would receive
if you were to retire at age 62 (the earliest date you can receive
benefits), the amount if you waited until full retirement age
(which currently ranges from 65 to 67, based on year of birth),
and the larger benefit you would receive if you continued working
until age 70 before claiming retirement benefits.
It’s interesting to note that the 2022 Social Security Trustees
Report includes a warning about the serious problems facing
Social Security in the future. Without changes, the Social Security
Trust Fund reserves will be exhausted by 2034 and there will be
enough money to pay only about 77 cents for each dollar of
scheduled benefits at that time (based on the current
formula). 1 This is a reminder that taxpayers are ultimately
responsible for funding their own retirements and that their
future Social Security benefits may be lower than indicated by the
Retirement Estimator.
People have traditionally seen Social Security benefits as the
foundation of their retirement planning programs. The Social
Security contributions deducted from workers’ paychecks have, in
effect, served as a government-enforced retirement savings plan.
However, the Social Security system is under increasing strain.
Better health care and longer life spans have resulted in an
increasing number of people drawing Social Security benefits. As
the baby boom generation (those born between 1946 and 1964)
has begun to retire, even greater demands are being placed on
the system.
In 1950, there were 16.5 active workers to support each person
receiving Social Security benefits. In 2022, there were only 2.8
workers supporting each Social Security beneficiary. And it is
projected that there will be only 2.3 active workers to support
each Social Security beneficiary by 2040.
Although Social Security payments are typically adjusted for
inflation, your own income and expenses may rise at a faster
pace. And you might have to wait longer than you anticipated to
qualify for full benefits.
It used to be that full benefits were available after you reached
age 65. But since 2003, the age to qualify for full benefits has
been increasing on a graduated scale based on year of birth. By
2027, the age to qualify for full Social Security benefits will have
increased to age 67, where it is currently scheduled to remain.
That means you may have to wait longer to qualify for full Social
Security benefits to start replacing a smaller percentage of your
pre-retirement income.
When calculating the income you will have in retirement, you
might recognize that Social Security benefits may play a more
limited role. Some financial professionals suggest ignoring Social
Security altogether when developing a retirement income plan.
Please feel free to call (215-836-4880) or email the office
(ellend@regardingyourmoney.com) to set up an appointment to
discuss Social Security or any financial questions you may have.
Or visit us at regardingyourmoney.com
Source: Social Security Administration, 2022