There are millions of Baby Boomers who are relying on Social Security to help through their retirement years. However, there are a lot of people who believe differently about Social Security and it’s important to clear up the misconception.
The first idea: Social Security Is Running Out of Money
Many of you may have head that Social Security is running out of money. Now this may sound scary, but here’s what’s really happening.
Remember, the Social Security trust fund is funded from payroll taxes. This money is then used to pay retirees
The problem is that there are more people retiring and collecting benefits than the amount of people who pay into the system. As a result of this, the Social Security trust fund is decreasing, and data suggests that it may be run dry by 2034 if nothing changes.
But even then, Social Security won’t disappear. Payroll taxes will still come in, which means about 75% to 80% of benefits can still be paid.
So, your benefits won’t be stopped completely, but it will be decreased.
People believe that you can only claim benefits at 65
There are many who believe that you can only claim benefits when you turn 65 years of age. This is not true.
You can indeed start claiming benefits from the age of 62, however, your benefits will be reduced. If you wait until Full Retirement Age (FRA), you will receive 100% of your benefits. However, if you wait until age 70, your monthly benefit will grow by about 8% each year you delay. That can really add up.
“Social Security is all you need during retirement”
This is biggest myth of all. Social Security is there to provide a portion of your retirement income, not the entire thing. Unfortunately, there are still millions who rely on Social Security as their primary source of income.
The cost of living is constantly increasing and Social Security on its own will not be enough to carry your through retirement. Americans are urged to look into other savings and investment options to ensure financial stability during their retirement years.
How to Get the Most Out of Your Social Security
Even though the system isn’t perfect, there are smart ways to make the most of your benefits.
- Wait Longer if You Can
It can be noted that the longer you wait, the more your benefits can potentially be. Where possible, try and wait until FRA to get 100% of your benefits, or even better, until age 70 to get the maximum possible benefit.
- Work a Few More Years
Your highest 35 years of income are used to calculate your Social Security payout. Working a little longer can enhance your average benefit if you haven’t worked for a long time or if you have some low-earning years.
- Don’t Forget About Spousal Benefits
If you’re married or even divorced after being married for at least 10 years, you might qualify for spousal benefits.
It’s a great option for couples where one partner earned significantly more over the years.
The Bottom Line
The government isn’t aiming to scare people but rather to make them aware. It’s important for beneficiaries not to rely solely on Social Security and have other forms of savings or investment.
More and more people are retiring, and this simply means that there are more people receiving benefits as compared to people paying into the Social Security system. Make sure you plan ahead and save accordingly.
With careful planning, you can still build a secure and comfortable retirement, even if the checks aren’t as big as you once hoped.
If you require, consult with a financial advisor for guidance and assistance.