The Future of Social Security
The Future of Social Security
The Social Security Administration issues about 5.5 million new cards each year. Social Security numbers go out of use when their owners pass away and are never reused. Also, the first three digits of the Social Security number reflect the application location for your first card.1
Here’s another interesting tidbit: You can apply to have your Social Security number changed if you can successfully argue a necessary reason, such as a stolen identity, being stalked by an individual who may track your Social Security number or objecting to a sequence of numbers for cultural or religious reasons.2
If you’re counting on Social Security as a primary source of retirement income, there are some things you should know. For instance, the more income you earn now, the fewer household expenses your Social Security benefit will cover. That’s because while a lower income earner may get a lesser benefit based on his record of earnings, that benefit may cover a higher portion of his prior earnings. Low earners retiring at age 65 in 2018 can expect Social Security to cover about half their prior earnings. However, the higher earner’s benefit is expected to cover only a third of his prior earnings. 3
Be aware that Social Security benefits tend to be less than what people expect they will receive. In 2018, the average retirement benefit was about $1,413 a month ($17,000 a year). In terms of how our government-sponsored benefits compare to the rest of the world, the U.S. ranks in the bottom third of developed countries as measured by the percentage of an average worker’s earnings replaced by a public pension.4
If you’re concerned that you don’t have enough assets to supplement your Social Security benefit in retirement, please give us a call. We can help identify potential retirement income gaps and create a strategy using a variety of insurance products to help you pursue your financial goals.
A recent study found that only 4 percent of retirees optimize their benefits; which means that 96 percent of retirees don’t get the full amount of benefits to which they may be entitled. That averages out to a loss of about $111,000 per household.5
How do you optimize your benefits? It’s often discussed that the best way is to delay taking them until age 70 — and then live for an extended period of time. Let’s consider a hypothetical example. If your benefit is $2,000 per month at your full retirement age of 66, but you delay drawing it for another four years, that benefit will grow by 8% a year for a total of $2,600 more a month for the rest of your life. From a cumulative perspective, if you then live to age 90 you would receive a total of $652,560 in Social Security benefits.6 However, all situations are different, and your personal needs and objectives should be considered to help you determine the appropriate time to claim your benefits.
It’s also worth noting that since the decline of company-sponsored pensions, Social Security may be the only source of retirement income that is not subject to market volatility and the vagaries of the economy. Because the risk pool covers nearly the entire U.S. adult population — including people not expected to live long in retirement — and because you can’t borrow from future benefits or request a lump sum, it’s a very stable source of income. And, it’s relatively cheap for the government to administer the program, costing only 0.7 percent of annual benefits.7
Content prepared by Kara Stefan Communications.
1 Len Penzo. Len Penzo dot Com. Aug. 13, 2018. “18 Fast Facts You Didn’t Know About Social Security Numbers.” https://lenpenzo.com/blog/id1510-18-fast-facts-you-didnt-know-about-social-security-numbers-2.html. Accessed July 5, 2019.
2 Sean Williams. The Motley Fool. Nov. 12, 2017. “7 Weird Social Security Facts You Never Knew About.” https://www.fool.com/retirement/2017/11/12/7-weird-social-security-facts-you-never-knew-about.aspx. Accessed July 5, 2019.
3 Center on Budget Policy and Priorities. Aug. 14, 2018. “Policy Basics: Top Ten Facts about Social Security.” https://www.cbpp.org/research/social-security/policy-basics-top-ten-facts-about-social-security. Accessed July 5, 2019.
5 CBS News. June 28, 2019. “Almost all Americans take Social Security at the wrong time, study says.” https://www.cbsnews.com/news/study-says-retirees-lose-more-than-100k-by-claiming-social-security-at-the-wrong-time/. Accessed July 5, 2019.
6 Jackie Youseff. Vanguard Blog. May 30, 2018. “The Social Security timing debate.” https://vanguardblog.com/2018/05/30/the-social-security-timing-debate/comment-page-4/. Accessed July 5, 2019.
7 Center on Budget Policy and Priorities. Aug. 14, 2018. “Policy Basics: Top Ten Facts about Social Security.” https://www.cbpp.org/research/social-security/policy-basics-top-ten-facts-about-social-security. Accessed July 5, 2019.
Our firm is not affiliated with the U.S. government or any governmental agency.
We are an independent firm helping individuals create retirement strategies using a variety of insurance products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic retirement income strategies and should not be construed as financial advice.
The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.