Social Security is a hot topic today whether you are retired, soon to retire or just hoping the system you are paying into will still exist by the time you reach retirement age. Many Americans know that triggering early benefits lowers their Social Security payout. What most workers don’t know is, their Social Security payout also continues to rise if they wait until after full retirement age to begin receiving their monthly benefit. Let’s start the Social Security conversation with a few facts…
The Social Security Act was a law created by President Roosevelt with the dual purpose of helping the elderly avoid poverty, while returning payroll taxes to workers who had been paying into the system throughout their career. Social Security was never intended to be the only source of income after retirement, but unfortunately this is often the case for millions of retirees.
When Social Security was created, companies and the government offered defined pension plans. These plans were used to bridge the gap between income and living expenses after an employee left the workplace. Upon retirement, employees were given the choice of taking a lump sum or moving their pensions into annuities to provide lifetime income. Due to inflation and other economic factors, most pensions have been eliminated or replaced by employee directed 401ks. Perhaps the most troubling trend we are experiencing today is the fact many employers are not offering any type of retirement savings plan. This unsettling pattern speaks strongly to the need for individuals to take steps necessary to plan for their future and make saving for retirement a priority.
Most Americans will rely on Social Security to meet a portion of their income needs during their retirement years. It’s estimated that approximately 98% of our population has earned some measure of Social Security benefits when they reach retirement age. On average, Baby Boomers depend on Social Security benefits to cover at least 40% of their income, which is needed to meet basic living expenses. Utilizing Social Security often leaves a large gap of expenses which other sources of income will need to replace for the remaining years of a retiree’s life.