Social Security Retirement Planning
Worried about your future Social Security benefits? Fleshing out current concerns and common myths.
By Michael Garry Yardley Wealth Management October 26, 2020
Social Security is one of the most popular government programs of all time, and it’s one that enjoys wide support across the population. Around 65 million Americans will receive more than $1 trillion in benefits during 2020, according to the Social Security Administration (SSA). Yet understanding exactly how this program works, as well as the best time to start taking benefits, isn’t always easy. Rumor and miscommunication around this program result in confusion about Social Security, especially in an election year.
I had the opportunity to share my thoughts on Social Security with Tracey Longo at Financial Advisor Magazine for her article Advisors Concerned As Covid Speeds Projected Social Security Shortfall. She posits that the Social Security Trust Funds are expected to see shortfalls starting in 2031, three years earlier than expected, according to a new forecast from the Congressional Budget Office (CBO). Without Congressional intervention to shore up the funds, the SSA will need to cut benefits to retirees and beneficiaries as much as 25% in 11 years, CBO said.
I’m quoted as saying: “I’m in denial. I don’t believe it will happen. Congress could cut benefits that much, but I don’t think any politician will if they hope to get re-elected.” I’m not worried about any cuts being as steep as 25%, but rather, I would expect to see marginal cuts for the highest earners—if any at all. And, if we realize a shortfall in five to eight years, I might start to worry and we’ll make adjustments.
Also, there are myths about Social Security that have been circulating for months. I thought I’d share what I hear as the most common Social Security myths with you here:
- One common myth is that illegal immigrants can come to America and start to immediately collect Social Security. That is not true. Immigrants who are legal residents are entitled to Social Security, but they need to work and contribute for 10 years, just like everyone else.
- Another misconception is that you should take Social Security right away because you aren’t going to live very long and you are going to leave a lot of money on the table. Sure, if you have a diagnosis or medical condition where your doctor doesn’t think you are going to live very long, go ahead and take your benefits early. Otherwise, wait. You only have to live to your mid-70s or so to make waiting the better choice and every year you live longer you get that higher benefit.
- Another common misconception is that you really don’t get any extra benefits for waiting to take your benefit. You really do get the extra 8% per year after you’ve reached your full retirement age. You also get added benefits for waiting from age 62 to age 65.
- One myth is that Social Security benefits don’t amount to much. For most people, Social Security benefits make up a sizable percentage of their retirement income.
- A final misconception is that the system is bankrupt and no one is going to get their benefits or that people under a certain age won’t get theirs. While there always seems to be a future funding shortfall for Social Security, it’s a political problem, not a math problem. If we get close to insolvency, our politicians will somehow find the political will to solve it, like they have in the past.
Please contact us if you’d like to discuss your financial plan. As always, hang in there.
My name is Mike Garry, and my company is Yardley Wealth Management, LLC. We are a fiduciary, fee-only financial planning, and wealth management firm in Yardley, Pennsylvania (that’s in Bucks County).
Our law firm is Yardley Estate Planning, LLC, and is in the same place. We only do Estate Planning work and I am licensed in Pennsylvania and New Jersey.
If you’d like to talk about this or anything else, please reach out: 267-573-1019, firstname.lastname@example.org or @michaeljgarry