Social Security seems to have become a bone of contention in this season’s elections – do we continue to give folks back the money they and their employers put into it, or should we encourage them to play the stock market? – but it’s still one of the best things that this country has ever done for us working folks. According to the Social Security Administration, 51% of workers have no private pensions they can count on, and 34% haven’t put anything away specifically for retirement, which makes Social Security one of the best deals in town.
Although we still have twice as many people working as there are collecting benefits, everyone agrees that sooner or later some changes must be made to the program. According to Timothy Geithner, Secretary of the Treasury:
“Social Security’s retirement and disability programs have dedicated funds sufficient to cover benefits for the next 20 years, but in 2033, incoming revenues and trust fund resources will be insufficient to maintain payment of full benefits.”
As Jane Bryant Quinn notes on the AARP website, however, we’re not really going off a cliff:
“Even in the unlikely event that nothing changes and the program’s entire surplus runs out in 2033, as projected, checks would keep coming. Payroll taxes at current rates would cover 77 percent of all the future benefits promised. That’s true for young and old alike, and includes inflation adjustments.”
Possible reforms include raising the retirement age, increasing the payroll taxes that pay for the program, and reducing benefits. The longer that Congress delays making some hard decisions on this subject, the less pleasant the solutions will be – and the smaller the number of wage-earners and retirees that will have to bear the burden of the changes.
That’s enough of statistics and scare talk; here are some real-world recommendations for those of us who are moving into our sixties.
- Delay as long as possible. Unless you absolutely can’t live without the money, don’t begin taking payments as soon as you qualify (generally age 62). Assuming that you’re going to live a few years longer, your patience will pay off big-time in the long run.
- Keep working if you want to. Once you’re at full retirement age (65-67) you keep anything you earn. Before that, you’ll have to give some back.
- Be prepared to pay some taxes. You’ll owe federal taxes on your Social Security benefits if your total income exceeds $25,000. If you and your spouse are filing a joint return, the cutoff is $32,000.
- Let your spouse in on it, too. Even if you’re divorced – even if you’re dead – your spouse (and dependents under 16) can qualify for benefits equal to a percentage of yours.
- If you go in for help, be prepared. Your local Social Security office can be very helpful if you show up in person, but make sure you’ve brought any paperwork that bears on you or your dependents’ financial situation. You can bring an advisor with you, too; in a complex situation, they could alert you to things that hurried staffers might miss.
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