I’ve spent more than a decade helping people get the most out of their Social Security.
Here’s roughly what most people tell me they “know” about Social Security:
“I think I pretty-much understand it. I can start at 62 or up to 70, though I get a bigger check later. I hear it’s running short of money soon, so maybe I should take it early, get what I can while I can. Though maybe I’ll wait until my Full Retirement Age, 67 I think, so I can get my full benefit.”
What we have here are some truths, some half-truths and one huge and problematic misconception. Let’s go through these.
It’s true that if you qualify for a work-based benefit, you can start it as early as age 62 or as late as 70—the amount goes up each month that we delay claiming. (I should note, though, that other types of benefits, such as spousal or survivor, have different timing rules.)
It’s also true that “Full Retirement Age” (FRA) is age 67, at least for anyone born in 1960 or later. However, there’s nothing meaningfully “Full” about claiming at this age: the amount is a little bit more than if claimed the month before and a bit less than if claimed a month later.
There is also a set of rules that applies to us before FRA and a different set that applies after FRA. These can be very important to understand, though few people do…
There’s some truth in observing that the program is “running short of money soon.” It’s well known—and has been for decades—that the Social Security program will go out of balance, probably in the early 2030s.
But there’s more to that story…
In 1983, Social Security came up against a similar shortfall that would hit in six months. In an overwhelming bipartisan fashion Congress and then-President Reagan fixed it with a mix of tax increases and benefit adjustment delays (raising the FRA). They fixed it so well, that those rules will carry the program about 50 years, into the early 2030s.
As in 1983, they will fix it again because it just requires tweaks around the edges to restore the balance for another 50 years or so—somewhat comparable to the changes made in 1983.
So when people wonder if the looming shortfall is a reason to claim early “before they run out of money”—that’s a worry they shouldn’t have. There will be no benefit cuts because Congress will fix it just as they did before.
The next question to consider is when to claim your Social Security benefits.
Do you claim art 62 or 70? Somewhere in between? Get to this point and you are well on your way to determining a benefit claiming strategy that will best serve you financially over your lifetime.
To me the most troubling part of what most people say to me about Social Security is: “I think I pretty-much understand it.”
That declaration creates a huge hurdle to overcome. With only a little bit of knowledge—some of it a bit twisted—you can become hardened in your attitudes. From that standpoint it’s tough for anyone to come to this (or any) topic with a fresh, open mind.
That matters because there is so much at stake! For over 90% of us our Social Security benefits are the single most valuable financial asset we own. More than our savings and investments… more than the equity in our homes… especially if we know how to get the most out of the program for ourselves and other family members.
Please don’t let a little bit of knowledge get in your way. The rewards of getting the full story about your Social Security benefits will surprise and delight you!
Editor’s Note: This message is NOT approved, endorsed, or authorized by the Social Security Administration. All information regarding Social Security discussed or mentioned here is available for free from the Social Security Administration.