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Have You Got a Clear Picture of Social Security? Are You Sure?

“Social Security benefits are a major source of income for retirees, but far too many seniors have no clear idea how these benefits work. Even worse, many seniors have major misconceptions about Social Security benefits that could affect their plans for retirement in adverse ways.”


Social Security will provide all the household income you’ll need during retirement. We really hope you’re not thinking this, but many Americans do. Here’s the thing: Social Security benefits are designed to replace only 40% of your pre-retirement income. According to most financial advisors, you’ll need at least 70% of your working income to live on during retirement.

Don’t count on Social Security to provide the lion’s share of what you need. Invest in an IRA or a 401(k) plan early in your working career. In a perfect world, you should start saving at least 15% of your income, but if you can’t do that at least do something. If you haven’t done anything yet, then get started.

You plan on filing for Social Security benefits at age 65. How’s this for uninformed: a study from the Employee Benefit Research Institute found that as many as 70%(!) thought they’d start taking Social Security at age 65. However, that line in the sand has moved a lot since your parents took their benefits. Your full retirement age is not likely to be 65. Check the Social Security website for your correct age.

Next, most people start taking Social Security at age 62, with age 63 being the median age when people claim their benefits. That’s usually the result of illness or unemployment, not good planning. The problem is, the earlier you begin to claim your benefits, the less you’ll get on a monthly and lifetime basis. The longer you can keep working and postpone claiming, the better.

What about your spouse’s income and earnings? Married couples have to do some joint planning when it comes to Social Security benefits. If you are eligible for widow or spousal benefits, you may be able to get higher benefits. If your spouse earned more than you, consider whether claiming under your spouse’s work record may bring more money into the household.

If you were married for more than 10 years and did not remarry, you can still claim under your ex’s work record.

If you’re the higher earner in the household, think about your spouse when it comes to claiming benefits. When one spouse dies, the surviving spouse has an option to either earn widow’s benefits or their own benefits, whichever is higher. However, if you claim benefits early, you’ve reduced your spouse’s benefits. Will he or she be financially okay after you’ve gone?

Planning on when and how to take Social Security should be part of a discussion about your overall retirement income strategy. You work hard, so make sure you receive the benefits you earned.

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