Social Security is 83! How to Get the Most Out of the Program

Q. My husband and I are approaching 62 years old, the year when we both first qualify for Social Security. Now that we’ve reached this point, I have a few questions about the program. I was wondering what the advantages are of taking the benefits earlier rather than later, or vice versa. Will I even qualify for Social Security benefits if I was a homemaker for most of my life? If not, are my husband’s benefits enough to live on? Also, with the program turning 83, will it even be around much longer? Similar to most seniors, we’re hoping to get the most out of the Social Security program. Thanks in advance for your help!

A. Eighty-three years ago, on Aug. 14, 1935, then-President Franklin D. Roosevelt signed the Social Security Act into law, with the intention of providing a guaranteed monthly benefit to aged workers during retirement. These payouts officially began on Jan. 1, 1940, and they’ve continued for the past 78 years. Currently, there are around 62.5 million people receiving a monthly benefit check, including 43.1 million retired workers.
As someone who is nearing eligibility age, of course you’d like to get as much as possible out of the program and enjoy a more financially secure retirement. To assist you, I will address some of the most common concerns about the program, and in doing so, answer your questions:

• Qualifying for Benefits if You Didn’t Work: Many people such as you, whose “job” was being a homemaker and full-time parent, think that they don’t qualify for any benefits. However, you may be pleasantly surprised to learn that even if you’ve worked mostly in the home, without receiving paychecks, or if you didn’t have much or any taxable income, you may still qualify for Social Security benefits. That’s because if you’re married, divorced, or widowed, you may be able to claim benefits based on your current, ex-, or deceased spouse’s earnings record — generally receiving between 50% to 100% of the spouse’s benefit (divorced claimants will need to have been married for at least 10 years and not have remarried.)
• How Much Your Benefits Will Be: Unfortunately, Social Security benefits aren’t likely to be nearly as generous as most of us would like – but on a positive note, they’re still likely to make up a good portion of your retirement income. The average monthly Social Security retirement benefit was recently $1,365, which amounts to $16,380 per year. If your earnings have been above average, you’ll collect more than that — up to the maximum monthly Social Security benefit of $2,687 for those retiring at their full retirement age (that’s about $32,000 for the whole year). You can get an estimate of your expected Social Security benefits by setting up a “my Social Security” account with the SSA.
• Knowing When to Collect: Many people think that they need to start collecting benefits at age 65, but that’s not necessarily the case. The normal (or “full”) retirement age used to be 65, but it has been increased for many of us. For those born in 1937 or earlier, it’s 65, and for those born in 1960 or later, it’s 67. For those born between 1937 and 1960, it’s somewhere in between. Despite that, though, you can start receiving benefits as early as age 62 and as late as age 70, but you need to be careful–starting to collect benefits too early or too late can be a costly mistake.

By starting at age 62, your Social Security benefits may be about 30% smaller than they would have been had you started at your full retirement age. That’s not necessarily a mistake, though, because the system is designed so that total benefits received are about the same for people with average life spans no matter when they start collecting. If you opt to begin receiving benefits at age 62, the amount will be considerably smaller, but you’ll receive many more monthly payments if you live to your projected life expectancy.

For those who expect to have enough income at 62 and perhaps for a few more years, and people in your family tend to live very long lives, you might want to start collecting later. By delaying when you start collecting Social Security, you can make your benefit checks bigger. For more details on collecting Social Security at a younger age, please read our article, “Should You Collect Social Security Earlier for a “Happier Retirement?”

For every year beyond your full retirement age that you delay — until age 70 — you’ll increase your monthly benefit by about 8%. So, delaying from age 67 to 70 can leave you with checks about 24% bigger. Remember, though, that it will still be a wash, if you live an average life span. So, it’s up to you, considering your personal situation, to decide when to start collecting. There’s no one-age-fits-all answer.
• Coordinate with Your Spouse: Married couples have many more ways to strategize about Social Security than single and never-married people do. For example, a couple might start collecting the benefits of the spouse with the lower lifetime earnings record on time or early, while delaying starting to collect the benefits of the higher-earning spouse. That way, the couple does get some income earlier, and when the higher earner hits 70, they can collect extra-large checks. Also, should that higher-earning spouse die first, the spouse with the smaller earnings history can collect a portion of those bigger benefit checks.

Social Security is Still Going Strong

Based on media coverage, you might be assuming that the Social Security program is on its last legs at 83-years old. But, things are not quite so bad!

Here’s why:

• The Social Security trust funds have been running a surplus in every year since 1982, taking in more from taxes and interest earned on taxes than they pay out in benefits.
• Social Security trust fund surpluses are likely to stop around 2019, at which point the Social Security system can rely on incoming interest payments to make up the deficit — for a while.
• According to several government estimates, if no changes are made, Social Security funds are likely to be depleted by 2034. If that happens, payment checks won’t disappear, but they could shrink by about 25%, leaving beneficiaries with about 75% of what they were expecting, which is certainly better than nothing.
• Fortunately, there’s a decent chance that the system will be shored up, one way or another. There are many possible fixes, though politicians don’t agree on them. Congress could theoretically can fix the problem by simply appropriating other funds to supplement the Social Security trust fund. Another option — it’s been estimated that 77% of the trust funds’ shortfall could be eliminated by increasing the Social Security tax rate for employers and employees from its current 6.2% to 7.2% in 2022 and 8.2% in 2052.
The more you know about Social Security and the more you strategize about it, the more money you’ll likely be able to get out of the system.

Social Security is Complex

Social Security rules and strategies are very complex. Before making any decisions, be sure to educate yourself. Below are tools related to Social Security and retirement planning, that can provide more details:

• For lots of additional details about Social Security, including spousal benefits, please visit our Social Security FAQ page.
• Read our articles: Ask the Expert: Can You Explain Social Security, please?, Can You Retire On Social Security Alone?, and What She Doesn’t Know About Social Security Could Cost Her Thousands.
• Check out AARP’s Social Security Planning guide.
It’s important to consider your options when filing for Social Security benefits. It is also important to keep in mind what could happen if you are living on Social Security alone and you or a loved one becomes incapacitated. You must take this into account when planning for retirement. Every adult over the age of 65 or retired needs to have a legal and financial retirement plan in place. If you haven’t already done this, please call the Farr Law Firm for retirement planning as soon as possible — if you haven’t been to see us before, you’re entitled to an initial consultation to address your retirement planning needs:

Fairfax Retirement Planning: 703-691-1888
Fredericksburg Retirement Planning: 540-479-1435
Rockville Retirement Planning: 301-519-8041
DC Retirement Planning: 202-587-2797