For years Americans have been operating under the notion that by the time they are ready to collect Social Security, their benefits will be insufficient at best to support their financial needs in retirement. While this may be true for some, for most seniors Social Security plays a critical role in their financial stability. Considering the fact that, by their own admission, the greatest fear among seniors today is having adequate income to maintain their lifestyle throughout retirement, the importance of Social Security cannot be dismissed. —
According to the Social Security Administration, roughly 10,000 Americans reach age 65 each day, a number expected to taper down to 8,000 by 2030 when the youngest of the baby boomer generation reaches retirement age. Unlike their parents and grandparents before them, baby boomers are stepping into a new era of post-retirement risk, created by a nationwide shift away from traditional, employer-sponsored benefit programs like pensions. This shift places the responsibility of saving for retirement entirely on the shoulders of individual workers.
These new dynamics, combined with the increased financial risks that retirees now face, make a strong argument for finding every way possible to maximize Social Security. Although it accounts for approximately 40 percent of an individual’s retirement income, few retirees understand exactly how Social Security works. While financial services providers have historically done little to help people squeeze the most out of their Social Security benefits, a new generation of retirement advisors is doing just that by educating seniors on how to make sure their benefits sustain them throughout retirement.
According to investment advisor and co-founder of ARQ Wealth Advisors James N. Robinson, there are seven different strategies, 81 age combinations, and 576 sets of calculations that can be used to determine an individual’s maximum Social Security benefit. The system that every worker pays into throughout their lives is designed to provide them with a regular income, guaranteed to increase over time and continue to pay until death.
“We live in what is becoming a pension-less society,” Robinson says. “Besides annuities, no other retirement vehicle can match the inflation-adjusted payment increases, longevity protection, lack of investment risk and spousal coverage like Social Security.
“Every retiree paid a portion of every paycheck they earned into Social Security, so when their turn rolls around it is only fair that everyone receives the maximum benefits to which they’re entitled.”
Learning how Social Security benefits work begins with knowing when to file. Age 62 is the earliest an individual is entitled to start collecting benefits, although it is almost never the best time unless there are health or longevity issues. Since benefits grow by about 8 percent each year from age 66 up to 70, waiting pays. Claiming at age 70 instead of 62 can increase the lifetime monthly benefit payment by 76 percent.
Maximizing Social Security payments requires strategy and knowledge of the system’s sometimes-unusual rules. For instance:
• Divorced couples who meet certain criteria can both claim full spousal benefits, something married couples are not entitled to.
• Married and widowed individuals have their own eligibility requirements for claiming spousal or “survivor” benefits, and strategy is key for maximizing payout.
• Individuals wishing to provide their wife or husband with a spousal benefit should file for their own retirement benefit first and then suspend payments to allow their benefits to grow at the rate of 8 percent annually from full retirement age until age 70.
Married couples stand to reap the greatest benefits from Social Security, but there are strategies to maximize benefits for everyone. Ultimately, the higher the income a retiree can claim in Social Security benefits, the more financial security and better quality of life they can enjoy throughout their golden years.
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Release ID: 84416