Social Security is a program that you have the joy of paying for your entire working life. The prospect that this precious stream of retirement income is no longer there once you leave the workforce is alarming to many Americans. As it stands, it is not a question of “if Social Security is going to run out of money” but of when. As the end of the COVID economy approaches, you might be wondering if the coronavirus will hasten the demise of Social Security?
According to the recent eighth annual survey of social security consumers By Nationwide, 71% of Americans fear that Social Security will run out of money in their lifetime. At the same time, 19% of those polled said the coronavirus pandemic would likely change when they choose to apply for social security benefits. I’m going to take a risk and assume that some of the 29% of people (apparently) who aren’t concerned about Social Security running out of money fall into one or more of the following categories:
1) Have another government pension (think Congressman and Senators)
2) Are so rich it doesn’t matter (think multimillionaires and billionaires)
3) Have already started social security benefits.
While the boom in real estate transactions and the surge in stock markets have been grounds for optimism, the coronavirus has led to a more pessimistic outlook on things like social security. According to the survey, 59% of Americans are more worried that Social Security will run out of money today than before the pandemic.
Interestingly, more people plan to claim Social Security later (11%) than to claim earlier (9%). Waiting to claim Social Security will increase your monthly benefits. This delay can also help increase your financial security later in life.
Each year, Social Security administrators publish a report on the expected solvency of the Social Security program over the long term. The report has yet to be released in 2021, following the darkest days of the Covid pandemic. (I’m optimistic that at least in the vaccinated areas of America – the worst days of the pandemic are behind us). So, you know, the 2020 Social Security report estimated that the combined reserves of the different Social Security programs (retirement, survivor and disability) would be exhausted in 2035 if changes in tax benefits are not made.
The pandemic has been a wake-up call for many Americans to reassess their finances and retirement plans, including how Social Security fits into those plans. More than two-thirds of respondents to the Nationwide Survey said it is now more important than ever to optimize their Social Security benefits.
It appears that the financial advisor community does not adequately advise clients on the best Social Security claims strategies. Like a fiduciary financial planner, I think social security advice should be part of every retirement plan. The majority of respondents to the Nationwide Survey said they had received no advice from their financial professionals. (Shame on them). Additionally, two-thirds of those polled said they would likely switch from their current financial advisor to another financial professional who could help them make the right choices when it comes to Social Security claims.
Can you live on social security alone?
Social security is not set up to replace anything close to your pre-retirement income. For most Americans, trying to live on Social Security alone will be difficult. If you’re incredibly thrifty and have paid off your mortgage, you may be able to do it. The average Social Security check is only $ 1,543 per month in 2021. To be fair, a couple, each receiving that amount, might be acceptable in many parts of the country if they both live and receive that way. social security benefits.
Maximum social security
the the maximum social security check in 2021 is $ 3,895, assuming you claim benefits at age 70. While this is a reasonable retirement income stream, it is far from replacing the income needed to get the maximum Social Security benefit. You would have needed a continuous salary of around $ 140,000 (or more) to get the maximum Social Security benefits.
Do your finances a favor and make a plan for when to apply for Social Security. Work with your financial advisor to determine the best time to apply for benefits. If they’re not ready to give you the advice you need, maybe it’s time to switch to a financial planner who can help you maximize your Social Security benefits.