Entire books have been written about the Social Security system and its rules, processes and idiosyncrasies. It is truly a very complicated system and almost impossible to understand, let alone to wade through the vast intricacies of its rules and procedures. Anyone who has reached the age to collect knows you are well paid for your efforts: just trying to define your rights is a major undertaking. This article is by no means meant to teach you the ins and outs of the system: just to banter around some surface items to get you thinking about this vastly confusing and complicated system.
Many people wonder if the system will be there at all when they retire: my unofficial opinion is yes, absolutely. The system was unveiled in 1935, to help people supplement their income needs in retirement with Federal old-age (don't be offended) benefits to aid the aged, blind, dependent and crippled children, maternal and child welfare and overall public health. It was meant to be a supplement to one's savings and pension benefits. Unfortunately, over time, it went from a supplement to the main source of income of approximately 85% of the people who receive benefits. With that statistic in mind, picture if you will all benefits stopping: millions of people will have no money for rent, food, medicine, and the staples of living. Taking it one step further, if rents don't get paid landlord will not be paying their mortgages, healthcare providers would not be paid, and so on. In my opinion, it would make the Great Depression look like a party. So, in my humble opinion, the chances of Social Security disappearing is close to nil. However, don’t discount changes: they may raise the retirement ages, cut cost of living increases, etc. Going bye-bye... no. Alterations... probably. Each day tens of thousands of baby boomers reach the age of 65, and change from personal health plans to Medicare, which raises the responsibility of the Government to support us more: which is why I think changes will be forthcoming. In 2014, more than a half-million people had medical costs in excess of $50,000, a 63% increase over 2013. For most, it was due to multiple health problems necessitating specialty drugs, at a high cost. Is this the trend going forward? So, you can count on changes coming down the pike, one way or another. The best way to combat this problem and fear? Prepare personally, and go back to the original reason for the start of the system: Social Security should be a supplement to your income, not the main source. Americans are being given the same advice more and more: work longer- but it's not that simple. Not all of us were born to live healthy and long lives, and health maladies intervene along with many other reasons to stop working.
But I digress, (as I often do) so back to Social Security. The system is highly complex with benefit qualifications as difficult to understand as Bob Dylan. There are experts who specialize just in this area, and when it's your time to apply, I suggest strongly that you do a number of things: the first is to read, read and read some more. Another is to consult with an independent person skilled in the ins and outs of the Social Security system. The system provides for benefits paid to benefit collectors, spouses and other very little known laws that are there for you all to collect more than you know. Not having gone through the process personally but speaking with many who have, you can't count on the person at the Social Security office to give you all the answers: and wrong or inaccurate "help" can be costly and detrimental to your income. When to collect, if you are still working, married, and even divorced can affect the amount of money Uncle Sam will pay to you and other members of your family, and as Sy Syms used to say, "an educated consumer is our best customer." Reductions in benefits due to earned income, taxation and adjustments to the actual amount you can collect vary due to your age starting 62 and up. They used to offer a deal that if you would take your benefits early and then pay them all back, you could update your income amount to your attained age- not so anymore, amended in 2010. You can suspend benefits only once in a lifetime and only within 12 months of your original application which may result in a larger check, but you can do it only once. It was a benefit available for decades, but an article in Kiplinger's raised so much interest in the loophole, they closed it. Probably the biggest conversation around benefits is when to take them: do I take a 25% reduction and start at age 62, or wait for my full retirement age of 65 or 66, dependent on your birth year. There is no right or wrong answer to the question: every situation is different, each person different. This is where the numbers crunching come into play. This hotly debated issue will continue to be hotly debated, and the answer is... there is no right or wrong answer. It's all about you, your health, if you are working, your spouse is working, your plans in retirement, your (unknown) life span, and a myriad of questions different to all of us, none of which is the magic solution. So my friends, the one right answer I have for you is to make sure you have looked thoroughly into the issue, have read everything you could, consulted with your tax advisor, your Certified Financial Planner® and your family, and take the leap. Above all, regardless of your age, be prepared to live it up and have lots of fun!
For more information on Neal's take on Life, Love and Money, just call the office to get his book, "Tales From the Chestnut Tree" at a discounted rate for all our readers. Just call the below number, we'll hook you up... happy reading!
