Tag Archives: social security benefits

The Death of Social Security Has Been Greatly Exaggerated

My Comments: Wow! A monthly payment every month for the rest of your life! How good is that?

Despite the caustic rhetoric filling the air waves, causing turmoil and worry, I very much doubt there’s going to be any drastic changes to Social Security. Some loud voices want it to be abolished, but there are more loud voices saying it will stay.

The demographic pressures now putting a strain on the system by the baby boomers will diminish as we die. There will be a gap until our baby boom children start reaching the system. It happened before and was more or less fixed in 1983. I suspect there will be another fix like the last one.

Yes, this was written almost two years ago but the analysis is still valid.

Dan Caplinger | Feb 10, 2017

Social Security has provided much-needed benefits to generations of Americans, both when they’ve become disabled and when they retire. Demographic shifts have put financial strain on the program, and well-publicized outlooks for Social Security show key sources of funding running out within the next 15 to 20 years. It’s therefore not surprising to hear many people talk about the death of Social Security as imminent.

It’s true that Social Security faces financial challenges and that lawmakers need to look closely at the consequences of making no changes to the current system. However, the alarmist notion that Social Security will go away entirely isn’t supported by the facts. That won’t necessary make the transition any more comfortable for those affected by it, but it’s important to avoid hyperbole and fully understand the current condition of Social Security and where it’s headed in the years to come.

Where Social Security stands now

The 2016 Social Security Trustees Report last summer gave a snapshot of how the Social Security system’s finances were at the end of 2015, and the status of the program was better than many people realized. When you look at the combined balances of the trust funds for Social Security retirement, survivor, and disability benefits, the amount available was $2.81 trillion. Moreover, when you consider all of the income sources that the program has, Social Security’s trust funds actually brought in more than they paid out for benefits. As a result, the total balance of the trust funds rose by $23 billion for the year.

However, the Trustees Report did show signs of the steady deterioration of the program’s annual surplus. The trust funds relied on more than $93 billion in interest payments from the U.S. Treasury to cover all of its benefit expenses. Payroll tax contributions left a shortfall of more than $90 billion, and the $32 billion that the IRS collected by taxing some Social Security recipients’ benefits couldn’t close the gap by itself.

The more troubling trend has come from the rise in benefit payments. Total expenditures rose at a 4.4% annual rate in 2015, and that exceeded the 4.1% rate at which revenue for the program grew. That 0.3 percentage point difference might not seem like much, but when you’re talking about amounts in the $800 billion to $900 billion range for revenue and outlays, even small percentages add up to big dollar amounts.

Preliminary figures for 2016 showed the trends continuing. Revenue of $957 billion exceeded payouts of $922 billion, but it took $88 billion in interest to keep the trust funds balance moving higher, reaching nearly $2.85 trillion for 2016.

What’s coming down the road for Social Security?

Given the current demographic trends, you can project how Social Security’s trust fund balance is likely to change in the coming years. Based on current projections, the trust funds should keep moving higher until 2019. After that, even the interest on the trust fund balance won’t be enough cover the shortfall between revenue and benefit payments. Over time, that shortfall will increase further, and the full depletion of the trust funds will likely happen in 2034.

Yet there are two reasons not to panic about Social Security. First, the consequences of failing to address the depletion of the Social Security trust funds don’t include the complete shutdown of the system. The Social Security Trustees estimate that in 2034, there will be enough revenue from payroll taxes and other sources to pay 79% of projected benefit obligations based on current law. Granted, a one-fifth cut in benefits will be painful for many Social Security recipients, but it won’t be the catastrophic disappearance of monthly checks that many seem to see happening.

More importantly, there are fixes that can help Social Security dig its way out of its current difficulties. The bipartisan Committee for a Responsible Federal Budget recently created an interactive tool letting people explore different ways to reduce the costs of the Social Security system going forward, weighing their likely influence on the program’s long-term shortfall.

Among those fixes are measures that would increase revenue or reduce benefit expenses. Proposals for reducing benefits include the means-testing of benefits for wealthier retirees, raising the retirement age, or modifying the way that retirees get inflation adjustments to their benefits. Revenue-enhancing measures include increasing the amount of wages subject to payroll taxes or making more Social Security benefits subject to income tax. In addition, the potential for investing trust fund assets in ways other than through special fixed-income Treasury bonds could also potentially produce more money for Social Security — albeit at greater risk.

Each individual solution only does a portion of the work necessary to close the Social Security shortfall. Taken all together, however, these solutions could leave Social Security in a better position to maintain a healthier level of benefits for current and future recipients.

Don’t panic!

Social Security’s future financial status is uncertain, and action is necessary to address its current situation. However, don’t leap to the conclusion that Social Security is on life support. With worst-case scenarios that aren’t as bad as some fear, and that should make people more confident that with relatively modest changes to the program, Social Security can be preserved for generations to come.

Source: https://g.foolcdn.com/editorial/images/432940/social-security-key-gettyimages-480456745_large.jpg

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Social Security and the U.S. deficit: Separating fact from fiction

My Comments: As someone who depends on payments from the Social Security Administration to maintain my standard of living, the idea that people in Congress are considering reducing those payments is concerning.

We have to hope that elected representatives find a reasonable solution that will allow the program to remain viable. It’s become an integral part of our economic destiny. Keeping it viable for the forseable future with structured changes over time is essential and doable without chaos.

Unfortunately, there is also a effort to promote chaos as a governing mantra.

by Mark Miller \ November 1, 2018

CHICAGO (Reuters) – For decades, some of our most prominent U.S. politicians have been sounding the alarm that Social Security is an important driver of the federal budget deficit. But is that really true?

U.S. Senate Majority Leader Mitch McConnell, a Republican, recently pointed to “entitlements” as the key cause of rising federal deficits, and blamed Democrats for refusing to go along with proposals to cut spending by Medicare, Medicaid and Social Security.

McConnell was responding to a report from the U.S. Department of the Treasury last month that the budget deficit grew to $779 billion in fiscal 2018, the highest in six years. Treasury attributed the increase to the tax cuts contained in the Tax Cuts and Jobs Act (TCJA), higher spending and rising interest payments. (Full Story) (reut.rs/2CNjSBm).

The call for cuts to our very popular entitlement programs just before an election makes for surprising politics – and it is not selling well with the public; a poll this week by NPR, PBS NewsHour and Marist (bit.ly/2zewazj) found that 60 percent of Americans would prefer to reverse the tax cuts than cut spending on Social Security, Medicare and Medicaid.

But is there substance to McConnell’s argument?

You can make a case that rising spending on Medicare and Medicaid contribute to deficits, since both depend partially on federal general revenue. I would counter that the rising cost of these programs reflects a general problem with rising healthcare costs that affects not just government, but employers who insure workers and individuals buying their own insurance.

But it is quite a stretch to argue that Social Security drives deficits.

By law, Social Security cannot contribute to the federal deficit, because it is required to pay benefits only from its trust funds. Those, in turn, are funded through a dedicated payroll tax of 12.4 percent of income, split evenly between employees and employers, levied on income (this year) up to $128,400.

The program’s revenue and expenses are accounted for through two federal trust funds that have operated with large and growing surpluses in recent years, and they finished fiscal 2018 with an estimated $2.89 trillion. By law, Social Security must invest these surplus funds only in special-issue U.S. Treasury notes, which have the same full faith and credit guarantee as any other federal bond.

LONG-RANGE OUTLOOK

Going forward, the trust fund surplus will be drawn down as an aging population claims benefits, and as the U.S. fertility rate continues to decline, which means fewer workers are coming along to pay taxes into the system.

That already is starting to happen. In fiscal 2018, expenditures exceeded revenue (including interest on investments) for the first time since 1982. Social Security took in $912 billion in fiscal 2018 and spent $991 billion. The difference – $79 billion – came from repayment of interest on those Treasury notes. Some conservative policy analysts point to that payment as evidence that Social Security is a cause of deficits, since the $79 billion payment came from general revenue.

“We can call that $79 billion an interest payment on past borrowing – fine,” said Brian Riedl, senior fellow at the Manhattan Institute, a conservative think tank. “Social Security in the past ran annual surpluses and lent that surplus money to the Treasury. In those years, the existence of Social Security reduced the federal budget deficit. Today, it is relying on a cash infusion from the Treasury to pay full benefits.”

 

Riedl’s point is technically correct. But in this sense, Social Security is no more a cause of the deficit than any other holder of U.S. Treasuries, be it Wall Street or the Chinese government. “Government needs to raise a certain amount of money unless it balances its general fund,” said Nancy Altman, president of Social Security Works, an advocacy group.

“If it doesn’t do that, it issues bonds – the only question is, who buys them?” said Altman.

A second argument that Social Security contributes to deficits is related to the longer-run outlook for the program. The trust funds are projected to be exhausted in 2034; at that point, incoming revenue would be sufficient to continue paying only about 75 percent of promised benefits.

We might or might not reach that point – we could eliminate much of this long-range shortfall by gradually increasing payroll taxes and raising the cap on covered income. Or we could reduce benefits by further increasing the full retirement age, or craft some combination of tax increases and benefit cuts.

Other creative options could include permitting the Social Security trustees to invest a modest portion of reserve funds in equities, or to levy a tax on financial services. From where I sit, the smart move is to bolster the program with higher revenue to close the shortfall and expand benefits.

But deficit hawks point to the 2034 exhaustion date to argue that the government would have to make up any shortfall and continue paying full benefits. The argument here is that Congress would never allow a huge cut to Social Security benefits in light of the program’s popularity and the importance of benefits; if the trust fund were to run dry, lawmakers would simply make up the difference out of general revenue.

But the assertion that we will reach the 2034 benefit cuts is speculative. Congress may craft a solution ahead of that date, or it may not.

Even more speculative is the question whether general revenue would be tapped if we do reach the 2034 exhaustion doomsday scenario. The long-range budget forecast by the Congressional Budget Office assumes this would happen – but not because the nonpartisan congressional budget scorekeeper has an opinion one way or the other. Federal law requires the CBO to assume that payments for some mandatory programs would continue to be fully funded in this situation.

What would the Social Security Administration actually do if the trust fund were exhausted? The answer is not clear, according to recent analysis by the Congressional Research Service. It could continue paying benefits on a delayed schedule or cut payments. And beneficiaries might take legal action to claim full benefits, since Social Security is a legal entitlement.

One hopes that these questions will never be answered, because exhaustion would be a real mess. But we can get the answer to the question of whether Social Security drives the deficit right now: No.

Source: https://www.reuters.com/article/us-column-miller-socialsecurity/social-security-and-the-u-s-deficit-separating-fact-from-fiction-idUSKCN1N64GR

Retirees Will Spend a Third of Their Social Security on This One Big Expense

My Comments: My efforts to coach people to start thinking seriously about their future retirement is complicated. For every positive associated with retirement there are just as many negatives. This is one of them.

Unless you plan to die before you reach retirement, you should find time to get your ducks lined up well in advance.

by Christy Bieber \ Nov 17, 2018

You probably have lots of plans for your retirement. Unfortunately, if you’re counting on spending your Social Security benefits on enjoying retirement, you may be surprised to find much of your money is eaten up by one expense that isn’t very much fun but that’s very necessary. 

That cost: healthcare. A new study from the Center for Retirement Research (CRR) shows that seniors spend an average of almost $4,300 annually per person on out-of-pocket healthcare costs.

These expenditures consume around one-third of the total amount of monthly benefits seniors receive from Social Security.

Your Social Security benefits will be consumed by healthcare expenses

According to the CRR, the average senior’s annual out-of-pocket spending on healthcare totals $4,274 per person, with $2,965 of that money going to insurance premiums.

Premiums generally must be paid for Medicare Parts B and D. Some seniors opt for Medicare Part C plans or Medigap plans that charge higher premiums but reduce coinsurance costs for care.  

Spending so much on healthcare significantly reduces income available to retirees. The CRR revealed the average retiree had just 65.7% of Social Security benefits remaining after paying out-of-pocket healthcare costs and just 82.2% of total household income remaining after paying for care.

And, for many senior households, things are even worse. Close to one-fifth of all retirees had less than half their Social Security income left after healthcare spending, and 6% of retirees spent more than half of total household income from all sources on healthcare.

Spending this much is a major problem, especially when many seniors are overly reliant on Social Security and have too little income to begin with

How can you keep healthcare costs down?

The best way to make sure you can afford your care as a senior is to save money specifically earmarked for healthcare.

If you’re eligible to contribute to a Health Savings Account, you can get big tax benefits. If you aren’t, you should set aside extra money in other tax-advantaged accounts, such as a 401(k) or IRA, specifically for care. 

Unfortunately, if you’re already in retirement and don’t have a fortune saved to cover healthcare, you’ll need to find ways to keep costs as low as possible. Some of the best ways to keep your healthcare expenditures low include:

  • Talking with your doctor: Medical professionals can often help you find generic versions of expensive medications, may have prescription drug coupons to offer, and can otherwise find ways to help you reduce spending if you’re struggling. 
  • Taking steps to stay healthy: The healthier you are, the lower your care costs. To stay healthy, get preventive screenings (which are often free under Medicare) so you can fix little problems before they turn into big ones. Avoid smoking, exercise regularly, and get help managing chronic conditions. 
  • Matching your insurance coverage to your needs. You have the option to buy a Medicare Part C plan to replace original Medicare, and some of these policies provide more comprehensive coverage. You can also opt for a Medigap plan to supplement traditional Medicare. By comparing what different policies cover — and cost — you can either choose to pay higher premiums for more coverage or reduce premiums and get a skimpier plan if you don’t use many medical services during the year. 
  • Determining if you can qualify for Medicaid. Medicaid can help you to more easily afford your care. Depending upon your income, Medicaid may provide help with Medicare premiums and coinsurance costs. Medicaid can also cover certain kinds of care Medicare doesn’t pay for, such as unskilled nursing home care. 

It’s up to you to find ways to keep healthcare costs as low as possible if you don’t want to lose a third — or more — of your Social Security benefits to healthcare costs. 

Healthcare is expensive — so make a plan

The new data from the CRR makes clear just how much of your money will be eaten up by healthcare. Experts have been warning for a long time that seniors will need a lot of money to pay for their care.

The sooner you start making a plan for taking care of your health needs as a senior, the more easily you’ll be able to afford them without skimping on everything else you’d hoped to spend money on during retirement. 

Source: https://www.fool.com/retirement/2018/11/17/retirees-will-spend-13-of-their-social-security-on.aspx

3 Awful Reasons to Take Social Security at 70

My Comments: Retirement mistakes are rarely obvious until long after you make them. And then it’s almost always too late to find a remedy.

Don’t let yourself fall for the argument that on it’s face says you get more money if you wait to claim your Social Security benefits. Regardless of when you start, you’re going to get about the same amount over time given that they end when you die.

My recommendation in almost all cases it to file when you reach your Full Retirement Age or FIA in SSA parlance. There are some charts in the original article that I didn’t bring over to this post so if you want to see them, click on the link at the bottom.

Brian Stoffel \ Aug 27, 2017

The first two are simple arithmetic. The third is much deeper.

It doesn’t take a rocket scientist to figure out why someone would wait until 70 — the latest possible age — to claim Social Security benefits. By waiting, monthly checks are 76% higher than if you claimed at 62, and 32% higher than if you claimed at full retirement age of 66.

Think about that. This is the difference between annual checks of $12,000 and $21,000. It’s not a small deal — and could be a major incentive.

But the reality is that waiting isn’t all it’s cracked up to be. In fact, if you’re considering waiting to claim Social Security benefits, make sure one of your reasons for doing so aren’t included below.

You want to maximize your lifetime payouts

The Social Security Administration isn’t stupid. They’ve used actuarial tables to figure out how long the average American is going to live and ensure that overall lifetime payouts will be roughly the same no matter when you claim.

That’s because while the 70 year-old might get $21,000 per year in benefits, he or she will also have eight years of receiving nothing, while the early claimer is collecting checks for 96 straight months — albeit at lower levels. In fact, while the exact numbers will vary depending on your lifetime earnings record, you can see that lifetime payouts don’t eclipse earlier claimers until you hit your early to mid-eighties.

You want to maximize spousal benefits

In households where one partner significantly out-earned another, it will make more financial sense for one partner to rely on spousal benefits. But understanding the basic ins and outs of such benefits is crucial.

Consider Taylor and Bailey, who are married. Taylor earned much more than Bailey. Thus, Bailey will rely on spousal benefits. Bailey can’t claim such benefits until Taylor does as well. At that time, Bailey’s monthly checks will be half of Taylor’s. If Taylor passes away first, then Bailey will forfeit the normal payment and just assume Taylor’s higher monthly check.

As such, if they want to maximize payouts from the moment they file, it might sound reasonable for both to wait until they’re 70. But there is a catch: spousal benefits max out at half of Taylor’s benefits at full retirement age, or 66 years old.

Let’s say both are the same age. It turns out that claiming at 66 (assuming you both live to the same age) remains the best choice all the way until your 80s, and waiting until 70 doesn’t become the best financial choice until once you enter your 90s.

Obviously, if Bailey is younger than Taylor, it makes even less financial sense for Bailey to wait until 70 to claim Social Security.

Because… money!

Of course, the unspoken assumption here is that more money is better. But once you enter your Golden Years — and hopefully well before — time and contentment become the real commodities worth savoring.

It’s definitely true that you need enough money to make ends meet, and if waiting until you are 70 to claim Social Security is the only way to do that, then you have little other option.

But it’s worth exploring what your real level of “enough” really is. It might be far lower than you think. And if that’s the case, you should retire as soon as possible. That’s because studies that are representative across America’s demographics show that retirees are far and away the happiest cohort in the country.

While waiting until 70 to retire might make sense for some, if trying to maximize individual or spousal benefits is your main motivator, it’s actually an awful reason to put off what is apparently the most enjoyable part of many Americans’ lives.

Source: https://www.fool.com/retirement/general/2017/08/27/3-awful-reasons-to-take-social-security-at-70.aspx

7 Things Everyone Gets Wrong About Social Security

My Comments: If you are not yet retired, which means different things to different people, chances are you’ll be eligible for Social Security benefits.

Before your magic day of retirement arrives, you need to have a solid understanding of how the Social Security System works and what you can expect to receive.

And also know that the system is currently under threat from so called leaders in Congress who may or may not fix it properly so that your generation can count on it being there as intended.

By Sabah Karimi / GoBankingRates \ October 18, 2016

Millions of Americans rely on Social Security earnings in retirement. If your golden years are far off in the distance, you might not give a second thought to Social Security and what the program means for you.

But that can be a mistake. If you don’t understand Social Security now, you could be in for some unfortunate surprises after you stop working.

For starters, the program might not be as healthy as you think. “Many estimates have the Social Security Trust Fund exhausting around 2034,” said Peter Donohoe, a Boston-based certified financial planner at Citizens Investment Services.

While many experts are hopeful politicians eventually will act to shore up the system, there are no guarantees. So, to be safe, it’s probably wise to make some smart money moves now that could put you in a better financial position when you retire.

Following are seven things everyone gets wrong about Social Security — and the truths you need to know to be prepared for retirement.

Myth No. 1: Your Benefit Is the Same Regardless of When You Retire

Three months before your birthday, the Social Security Administration sends you a recap of your annual earnings history. If you review this statement closely, you will see that the breakdown of benefits is based on your earnings to date. The statement gives you an estimate of benefits you will earn if you continue working until you reach a certain age.

Many people mistakenly assume their monthly Social Security retirement benefit will be the same no matter what age they retire. However, retiring from work and claiming Social Security at a younger age can hurt you.

Look closely at your statement, and you will see that you can get a bigger benefit by delaying retirement and claiming benefits after your full retirement age. The difference can be as much as a few hundred dollars more per month if you wait than if you retire at 62.

Myth No. 2: You Can Wait Until Retiring Before Thinking About Social Security

Long before you retire, try to learn about the Social Security benefits for which you eligible. Too many people overlook this step.

Learning more about Social Security benefits can help you make more effective financial planning decisions. For example, you might be eligible for your ex-spouse’s benefits, yet not even know it. You can also earn a bigger Social Security check simply by delaying retirement beyond your full retirement age.

You can find a wealth of information about retirement planning on the “Retirement Planner” page of the Social Security Administration website.

Myth No. 3: You Automatically Get Full Benefits When Reaching Age 65

Don’t automatically assume you will receive benefits as soon as you reach 65 years of age. Social Security rules have changed over the years. “The reality is that full retirement age, or ‘FRA,’ was age 65, but is now based on your year of birth and may currently be up to age 67,” Donohoe said.

You still have the option of taking your benefits at age 62, but you will receive a reduced benefit — about a 30 percent reduction — if you do. If you receive a spouse’s benefit beginning at age 62, your benefit is reduced to about 32.5 percent of the amount your spouse would receive if he started getting benefits at full retirement age.

It is a myth that taking your benefit early always pays the highest lifetime benefit, Donohue said. The reality is that many factors — including future cost-of-living adjustments and your eventual age of death — influence “which claiming date maximizes lifetime benefit,” he said.

Myth No. 4: You Can Keep Working While Claiming Full Social Security Benefits

A big percentage of Americans misunderstand the rules for working when collecting Social Security benefits.

More than half of people in a MassMutual survey wrongly thought they could continue working at any age while also collecting full Social Security retirement benefits.

Although you are free to work and receive Social Security retirement benefits, the government will reduce your benefit if you are younger than your full retirement age and end up making more than the yearly earnings limit. In 2016, that earning limit is $15,720. The Social Security Administration deducts $1 in benefits for every $2 you earn above that limit until you reach retirement age.

Things change a little as you get close to full retirement age. In the year you reach your full retirement age, the Social Security Administration deducts $1 for every $3 you earn above the annual limit. In 2016, this limit was $41,880. And once you are fully retired, you can keep working without any deductions on benefits — there are no limits on your earnings.

Myth No. 5: You Cannot Collect an Ex-Spouse’s Social Security Benefits

If you end up getting divorced during your lifetime, you are eligible to receive Social Security retirement benefits based on your ex-spouse’s earnings history, said David Freitag, a financial planning consultant with MassMutual. More than 55 percent of Americans who took the MassMutual survey didn’t know this was an option.

The Social Security Administration lists the conditions of eligibility for these benefits. Among other factors, they include having been in a marriage that lasted at least 10 years to an ex-spouse who is unmarried, and age 62 years or older.

If you start receiving benefits at your full retirement age, your benefit is equal to one-half of your ex-spouse’s full retirement amount or disability benefit, according to the Social Security Administration. But, if you end up remarrying, you cannot collect benefits unless your next marriage ends by death, divorce or annulment.

Myth No. 6: A Spouse Can’t Receive Your Social Security Benefits

Even if your spouse has no earnings history or doesn’t meet the 40-credit requirement to receive benefits, he is eligible for Social Security retirement benefits simply because he is married to you, Freitag said.

To receive this spousal benefit, your spouse must be at least 62 years of age or have a qualifying child in his care. The total benefit might be as much as half of the primary worker’s primary insurance amount. The Social Security website can help you calculate the primary insurance amount.

Myth No. 7: You Are Likely to Be Disqualified for Social Security Benefits

Don’t worry about getting to retirement only to end up disqualified for benefits. “It is more likely to accidentally ‘miss out’ on full benefits than it is to be disqualified for Social Security,” Donohue said.

You can, however, miss out on benefits if you get a part-time job before full retirement age and no longer pass the earnings test, Donohue said. You might also miss out on benefits if you are eligible for a large widow or widower benefit when your spouse dies, but you then get remarried before you turn 60. If you are divorced and get remarried, you will miss out on a spousal benefit.

“Proper planning around life events and claiming is vitally important when claiming Social Security,” Donohue said.

Source: https://www.gobankingrates.com/retirement/social-security/everyone-wrong-social-security/

3 Things That Affect When You Should Apply for Social Security

My Comments: As you approach your retirement and your 62nd birthday, this question becomes increasingly relevant.

Retirement is that point in your life when you essentially quit working for money and instead money starts working for you. The challenge is to make sure it’s working hard enough to keep you from running out of money before you run out of life.

Social Security benefits have become an absolute requirement for millions of Americans to maintain an existing standard of living as they age.

by Brian Stoffel \ April 17, 2017

You can choose to take Social Security as early as age 62 and as late as age 70. When to claim your benefits is a question many retirees take a long time to consider. To make the best decision, it’s important to look at how your monthly benefits change based on when you begin receiving them.

Currently, the average retirement benefit check from the program is $1,360, and the average retirement age is the earliest option, 62. But if recipients waited, these checks could get much bigger. Here’s what it would look like for those born in 1954 and earlier:

As you can see, those aren’t small differences. On the one hand, if you wait until age 70, your monthly benefit will be a whopping 76% higher than if you claim right away. On the other hand, if you do decide to delay your benefits that long, you’ll go almost a decade with no Social Security income coming in even though it was an option.

While there are tons of different variables that affect when you should apply for Social Security benefits, the following three questions often play an outsize role.

1. How do you feel when you get up and go to work in the morning?

This may seem like an odd place to start, but hear me out. Most people worry about having enough money to retire — that is an important concern, and we’ll get to it in a bit. But there’s one big blind spot to tackle first: hedonic adaptation.

You’ve likely heard hedonic adaptation being used in the context of getting used to lifestyle improvements, as in, “Even after buying the new car to keep up with the Joneses, Mark was still miserable — that’s hedonic adaptation for you.”

But in truth, it works both ways: We can have much less materially, and not be nearly as depressed about it as we’d expect.

If you want proof, I point you toward a Merrill Lynch/Age Wave survey that came out in 2015. When respondents of different ages were asked how often they felt happy, content, relaxed, and/or anxious, here’s how they responded:

https://infogram.com/percent-who-said-i-often-feel-1ge9m8ny434omy6

And lest you think that this was just a survey of wealthy respondents, it was “nationally representative of age, gender, ethnicity, income, and geography.”

The bottom line is that if you hate your work and you can make ends meet on Social Security plus other sources of income, you shouldn’t wait to apply for benefits.

2. Can you make ends meet?

Of course, we can’t forget entirely about money. In the survey mentioned above, 7% of retirees said retirement was less fun and more stressful than pre-retirement years. The main culprit: financial concerns.

Almost all retirees report spending less in retirement than while they were working, and these expenses continue to fall as people age. Of course, everyone has heard about rising healthcare costs — and it’s true that healthcare expenses do jump. But there’s a host of other realities that keep costs down: less money spent on transportation costs commuting to and from work, a drop in food costs as you can make your own food more often, and a house finally being paid off in full, to name a few.

In general, you’ll need to calculate how much income you’ll get from three streams:

  • Social Security and/or pensions
  • Withdrawals from your own retirement accounts, using the 4% rule
  • Other forms of income

The “other” forms of income could come from rental properties you own or even part-time work.

The bottom line is that you should try living for six months on this income to ensure that it’s suitable.

3. Have you coordinated with your spouse?

Finally, we have to deal with the sobering reality that one partner often lives longer than another. In that situation, Social Security has a simple rule: The surviving spouse gets to either keep his or her current benefit, or assume the benefit of the deceased — whichever is larger.

It’s important to remember that, statistically speaking, wives will live longer than their husbands. And if husbands were the higher earners, they may want to consider waiting as long as possible to claim their benefit, as it maximizes what their wives will receive after they pass away.

In this respect, there are a dizzying number of variables to consider, and I suggest doing further reading to figure out which will be best for you and your partner.

In the end, if you can answer these three questions accurately, you’ve got a good grasp on the factors affecting when to claim Social Security benefits.

Source: https://www.fool.com/retirement/2017/04/17/3-things-that-affect-when-you-should-apply-for-soc.aspx

3 Reasons 62-Year-Olds Should Take Social Security Now

My Comments: To all this, I will add another reason to take your benefits early.

Reason #4: You are single and might not live very long.

This applies to people who are single, likely to remain that way, and have a serious health issue. If there is reason to think you might not live into your 80’s, take the money and run. Benefits stop when you die. So if you pass before you reach the break even point, you’ve not left any money on the table.

by Dan Caplinger \ October 15, 2018

As people approach retirement, it’s natural to want to claim Social Security as soon as possible. Even though waiting beyond the earliest claiming age of 62 for retirement benefits can give you larger monthly checks, you still have to make it through months or even years without getting anything at all from the program.

The trade-offs between more benefits later or collecting benefits sooner can be tough to analyze. But there are a few situations in which it generally makes a lot of sense to look closely at making the decision to take Social Security at 62. Here are a few of the most important ones that millions of retirees and near-retirees face all the time.

1. When a family member is waiting on you to claim

In order for a spouse, child, or other eligible family member to collect benefits based on your work history, you have to have filed for your own retirement benefits first. This wasn’t always the case, because retirees could use strategies like file-and-suspend to activate spousal or children’s benefits while retaining the right to get a larger retirement payment in the future. Recent law changes put this restriction on nearly everyone seeking to claim family benefits.

This most often comes up in one-earner families in which the nonworking spouse is older than the working spouse. For instance, someone who’s four years older than you are might have to wait until 66 to claim spousal benefits just to give you time to make it to the minimum age of 62 for claiming early benefits. Waiting even longer than that might not be a good option for your spouse in that situation.

Also, children’s benefits tend to be available only for a short period of time — until the child turns 18 or graduates from high school. For those relatively rare situations in which a child is still below that age when you hit 62, claiming immediately could be the only way to get those children’s benefits on top of regular retirement payments.

2. When a surviving spouse wants to maximize total benefits

Unlike most benefits, a surviving spouse can make separate decisions about when to claim survivor benefits based on the deceased spouse’s work record and when to claim the surviving spouse’s own retirement benefit. Therefore, it often makes sense to claim retirement benefits early while letting the survivor benefits continue to grow by waiting before claiming them as well.

At first glance, it might seem like this would result in smaller checks than what you’d get if you claimed all your benefits at once. But because of the way that Social Security calculates payments, you can often get almost as much just by claiming one of your benefits and then get more money later when the other benefits have grown. This is one of the only situations in which Social Security essentially lets you have your cake and eat it too.

3. When you’ll have to give up your benefits because of a public pension

One of the most hated Social Security provisions involves employees who work in the public sector in a state that doesn’t participate in Social Security. Through the Windfall Elimination Provision, you can lose as much as $447.50 per month in Social Security benefits if you had a career of 20 years or less for a private employer before going to work in the public sector. In some extreme cases, this can eat up your entire Social Security payment, although the reduction is also limited to one-half of your public pension.

If you become eligible for public pension benefits only at a later age, then claiming Social Security before that age can give you a brief period of full payments from the program. When pension benefits start getting paid later on, the Social Security Administration won’t go back and take away your past Social Security, as the Windfall Elimination Provision only applies to current and future payments.

Make the right choice

There are plenty of situations in which waiting to take Social Security until well beyond 62 is the smartest move. However, that’s not always the case. In these particular cases, claiming early can sometimes be the best decision you could make.

Source URL: https://www.fool.com/retirement/2018/10/15/3-reasons-62-year-olds-should-take-social-security.aspx