Worried about Social Security and your retirement?
If you’re worried about Social Security and your retirement, you should be. Hi, I’m Tom Cock from Merriman and let’s talk about the Social Security System. Remember this is a pay-as-you-go system. In other words, dollars are supposed to come in, dollars are supposed to get paid out. Unfortunately, the government, of course, has put IOUs against most of that money and has used it for other things, and we’ve got some bad news here in the past few days.
We learned that Social Security, the giant trust fund, is expected to run out of money by the year 2037 and will be net negative by the year 2016. Years earlier, that had been expected and the reasons why are pretty easy to understand; we’re in a recession, there are few people working, fewer people paying into Social Security and part 2 is the 78 million baby boomers, of which I am one, are getting older and they’re starting to draw on Social Security.
So what should you do if you’re still a few years away from retirement, maybe even more than that. Should you be thinking about Social Security? Should you be worried about it? Well, let’s chat about it for a minute and you should pay attention because right now, Social Security for retired folks makes up about 40 percent of their retirement income.
So it does replace a large part of the money that you make while you work and there are experts that will tell you that’s going to change in the future in terms of how you get it. We’ll touch on that in a minute, but first, some basic ground rules around Social Security.
If you wait longer, it is set up like a giant actuarial table. If you wait longer to start getting your benefits, you’re going to get more. If you wait until age 70, you’ll get about 132 percent of your benefit. If you wait until full retirement age, which for me is 66, you’re going to get, of course, a 100 percent.
But if you take it at 62, you only get 75 percent of your benefits, so what should you be doing around all that? Well, there’s all kinds of suggestions and it makes sense that if you’re married for the higher wage earner to wait longer, not start taking Social Security until 70. The lower wage earners, most oftentimes a woman to take it earlier because then when the higher wage earner passes on, he leaves that higher benefit for his wife.
It makes sense to really think about that. The one wild card in all of this is your health and your family history. If you don’t have longevity on your side, then maybe you want to take it earlier. If your health isn’t good, you certainly don’t want to wait until it’s too late to start getting that benefit that you paid in so many years.
Remember, Social Security looks at the 35 highest earning years you have to determine your benefit amount. So back to this whole question around what you should do about Social Security.
If you’re worried about it, well, let me give you some parameters again to think about. The experts believe that one of three things is likely to happen to Social Security in the next 20 years. First of all, there’s likely to be some sort of means testing. They’re probably going to look at your household and see how much money you’re taking in from your pension, other retirement avenues and say, “You’re going to get less Social Security,” that is one.
Part 2 is they’re probably going to make you wait longer to get it. You may not be able to get it until 68, maybe not until 70. Remember we’re living a lot longer than when Social Security was set up back in 1935.
And Part 3 is taxes for Social Security will likely go up in the next, maybe just a few years, from 6.2 percent to maybe over 7, no one knows for sure.
If you’re counting on Social Security, do your equation today. You should get something from Social Security on a regular basis that says this is how much your benefit should be at full retirement. Use that in your equation, but be thinking about 15-20 years down the road, you may be getting just a bit less.
I’m Tom Cock from Merriman.
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I HAVE SOME QUESTIONS ABOUT SS I WANT TO FILE IN NOVEMBER 09 WHEN I WILL BE 62. CAN I FILE BEFORE THAT DATE AND HOW LONG ONCE FILED DOES IT TAKE TO REEIVE THE FIRST CHECK. IF YOU CAN GIVE ME INFORMATION I WOULD APPRECIATE I HAVE SAT ON THE PHONE FOR AN HOUR AT A TIME AND CANNOT GET ANY ANSWERS.
THANK YOU
K.CRAVEN