Social Security

Social security is a economic-political-thorn that has bedeviled politicians, economists and social historians almost from the day it was signed into law. But out of all the programs enacted by FDR in his New Deal none has removed abject poverty from Americans as much as has social security. It is also a program that has been misused and mismanaged, Almost every one of us is required to pay into the program but few fully understand how exactly it works. The fact that politicians can and have increased, decreased or eliminated benefits is certainly documented but may not be that well known or understood. Many Americans assume that  social security is a guaranteed entitlement as a gift from some higher order. On my radio show, when I’ve talked about the government extending the age of a retiree before receiving retirement benefits, I’ve had irate callers state that the social security money was theirs and the government had no right to steal it from them. Then there are others who have no idea how social security works or  even when to begin receiving income, or who to ask.

Prior to the global market collapse President Bush the Younger attempted to revamp social security by allowing people to manage their own  social security pool. Thankfully clear  thinking  individuals and groups turned that away or we’d be up to our belly-buttons in broke begging blue hairs. Most folks have a tough enough time managing their 401k without being given the responsibility of a lifetime income portfolio.

Social security  represents  for most people the single largest pool of income producing money they’ll ever accumulate. The average monthly primary social security income in 2010 is roughly $1, 170.00. In order to get that same income from an annuity an individual would have to have saved about $400,000. It is safe to say that Social security represents the core income for most retirees.

Recently I have been distressed to read that there are certain financial organizations and talking heads who are recommending that people wait past normal retirement before they start taking their social security retirement income benefit. The reason these financial experts give is that people will be able to lock in a higher income level for life by waiting and there is also the possibility of reducing their income taxes by spending down their personal savings and especially retirement accounts before getting social security income.

Most financial planners recommend that retirees begin social security benefits as soon as they are eligible since waiting even three years to start may take 14 years just to make up the difference or get to the break even point. Today the average male dies at 78 and the average white female dies at age 81. It doesn’t take a math whiz to figure out that waiting is a definite losing proposition. If a male starts at age 70 instead of 67 the income will be higher but he will not catch-up with the total amount he missed in the previous three years.

The recommendations to wait come from such august authorities as Prudential Life and Morningstar which baffles me. Inflation and longevity both play roles in the decision on when to begin taking income and yet neither paper I have reviewed mention those two possibilities.

Social security has a web site with income and benefit calculators along with their 1-800 phone number to establish an appointment locally. I advise anyone who is within five years of receiving social security to go on-line and check out their benefits with the social security benefit calculator. Please go to www.ssa.gov. There is no reason that anyone should stumble blindly toward retirement without knowing exactly what is in store for them.

And, as always, if you have any questions or desire to have me calculate your total income based upon your portfolio growth, please contact me.

Questions call Paul @ 877 783 7080 or write him at pstanley@westminsterfinancial.com. Share this blog with someone who cares about their money.