Most Americans rank Social Security as “one of the top” issues or a “very important” issue determining who they will vote for in the upcoming U.S. presidential election, according to a new CNBC poll. Social Security reform is also a top concern, according to a separate survey from the Nationwide Retirement Institute. The majority of respondents said that a candidate’s stance on the topic would be a major factor in their vote.
CNBC polled 1,001 registered voters July 31-Aug. 4. Nationwide’s poll, conducted April 19-May 13, surveyed 1,831 adults “who currently receive or expect to receive Social Security.”
Amidst the looming concern of the Social Security trust fund running out by 2033, many Americans are feeling the pressure of uncertainty about the future funding of this critical government program. According to Nationwide, 72% of adults worry that the Social Security system will run out of funding in their lifetime. This level of concern spans across generations, with even millennials showing high levels of anxiety.
Tina Ambrozy, a senior vice president at Nationwide, noted that in the 11 years that the annual survey has been conducted, there hasn’t been such a high level of interest in Social Security reform. This growing concern underscores the importance of understanding how to maximize Social Security benefits to ensure financial stability in retirement.
Social Security benefits are a significant source of income for nearly every retiree in the United States. This year, almost 68 million Americans will receive a monthly Social Security benefit, totaling about $1.5 trillion in benefits paid. Retired workers receive an average of $1,918 per month, according to the agency.
However, many individuals lack a clear understanding of how the Social Security system works and how they can optimize their benefits. This lack of knowledge can lead to increased anxiety about retirement planning. To help ease this stress and assist individuals in maximizing their Social Security benefits, here are five key steps to consider:
1. Know Your Full Retirement Age
Understanding your full retirement age is crucial in determining when you can receive 100% of the benefits you’ve earned through Social Security. Many people confuse the full retirement age with the Medicare eligibility age of 65. For most individuals retiring today, their full retirement age falls between 66 and 67.
If you were born between 1943 and 1954, your full retirement age is 66. For those born in 1960 or later, the full retirement age is 67. The full retirement age gradually increases from 66 to 67 for individuals born between 1954 and 1960.
2. Determine the Impact of When You Claim Benefits
While you can start claiming Social Security benefits as early as age 62, doing so will result in reduced benefits compared to waiting until your full retirement age. For example, if your full retirement age is 67 and you claim benefits at 62, your benefit could be reduced by as much as 30%. On the other hand, delaying claiming benefits past your full retirement age and up to age 70 can result in an 8% benefit increase each year.
It’s essential to weigh the impact of when you claim benefits on your overall retirement income and financial stability. While waiting to claim benefits can lead to higher payments, it may not be the best choice for everyone, especially if you have health concerns or immediate financial needs.
3. Get a Benefits Estimate from SSA.gov
Despite the importance of Social Security benefits, many Americans are unaware of how much they stand to receive in benefits. Creating a “My Social Security” account on the Social Security Administration’s website at ssa.gov can provide you with a statement detailing your earnings history and estimated retirement benefits from ages 62 to 70.
Even if retirement is years away, having an estimate of your potential Social Security benefits can help you better plan for your financial future. This statement can provide you with a rough idea of how much income Social Security may replace in retirement, assuming you continue working and earning wages in line with inflation.
An annual review of your Social Security statement is crucial to ensure that there are no errors in your earnings history. Mistakes in your wage history can impact the amount of benefits you receive, especially if you are self-employed or have held multiple jobs over the years. By staying informed and proactive in checking your earnings record, you can avoid potential discrepancies that may affect your benefits.
4. Coordinate Social Security Benefits with Other Assets
In planning for retirement, it’s essential to consider how Social Security benefits will complement other sources of income, such as pensions, 401(k) savings, IRAs, and other financial resources. By listing all potential retirement resources available to you, including proceeds from a home sale, you can better assess the role Social Security benefits will play in your overall retirement income.
Some experts suggest using workplace savings accounts as a bridge to delay claiming Social Security benefits, allowing you to maximize your benefit amount. By strategically coordinating your retirement resources, you can create a comprehensive financial plan that aligns with your long-term goals and needs.
For married individuals, it’s important to evaluate whether it makes financial sense for the higher-earning spouse to delay claiming Social Security benefits or if early claiming is more advantageous, especially in cases where one spouse is in poor health. Consulting with a financial professional to explore various scenarios can provide valuable insights into optimizing Social Security benefits within the context of your overall retirement plan.
As you navigate the complexities of Social Security benefits and retirement planning, it’s crucial to approach the process with diligence and foresight. By understanding the intricacies of the Social Security system, maximizing your benefits, and coordinating them with other assets, you can enhance your financial security in retirement and ensure a stable future for yourself and your loved ones.