Take Stock of Social Security Retirement Benefits

by Kathryn Hauer, CFP®, EA

Did you ever work really hard to learn a new skill? At one point, you couldn’t run a block but you got into running and you now run marathons? In the process, after working so hard, I’ll bet your holiday gift list started to include expensive but well-deserved items like $180 Asic Gels.

Social Security retirement benefits are similar: by the time you collect Social Security retirement benefits you will have worked for 30 or 40 years, consistently paying into the system with your hard work and dollars. The time and effort that went into those years net you a valuable result: a form of a “pension” until you die. The monthly stream of cash flow you’ll get back after you can no longer work is a valuable prize that you earned.

At some point, it may also become the only money you have. When you retire and no longer earn money, you’ll probably need to rely on a combination of your savings and your Social Security retirement payments. Few of us will have company pension income and most of us will get to a point where we are unable able to work a full-time or even part-time job, even if we are very healthy in our 80s and 90s. I don’t mean to be negative or depressing, but the reality is that for years or maybe decades of life, it will eventually become impossible to bring in more cash.

Relying on Social Security in Retirement

As the years of your retired life pass, you’ll receive Social Security retirement payments that you’ll use in conjunction with regular savings and retirement savings to pay your expenses. Even if you live very modestly in your old age, you still will need to pay for a place to live, food to eat and some medical care since Medicare doesn’t completely cover health care for free.

For those retirees who do have money saved up and have or will have a paid-off home, the reality is that the blessing of a long life may erode those assets. If you live into your 90s, there’s a good chance that you may have used up your savings. As your savings are spent, you may also have needed to tap into the equity of your paid-off home. At that point, it is unlikely that you will be able to earn more money through employment and you will have to rely on the cash that comes in each month from Social Security to pay your living expenses. Half of Americans have nothing in retirement savings, while others have some money saved. The fact is that savings can be used up. Your Social Security benefits will continue for the rest of your 90, 95 or 100-year+ life. That’s comforting.

Tracking Benefits

No matter what your age is today, you need to follow these steps to track that lifeline of retirement cash flow. Have you been getting those yearly mailed statements that list your annual wage total and provide your expected benefits? Those are a great yearly check. We’ve gotten them for decades and I never developed a consistent place to stash them. Plus, they only came once a year, so a mid-year planning effort was difficult when I didn’t know where I put them. Now you can access them online anytime to track progress and estimate for the future. Here’s what to do:

1) Set up your Social Security account online at SSA.gov.

2) Check your earnings from each previous year and make sure they look right. Your retirement benefit is based on your highest 35 years of employment (not your last 35 years), adjusted by an inflation factor based on the years the earnings were made.

3) Use the Retirement Estimator and explore options to get an idea of what you might draw once you’ve retired if things changed financially in the future.

4) If you are nearing retirement, consider waiting until your full retirement age (FRA). When you wait years past your FRA, you get a much higher monthly amount. Check out your own statement to see the difference.

5) Remember that if you are married and your spouse is alive, you will either get your own monthly retirement benefit or half of your spouse’s or ex-spouse’s if you’ve been married long enough, whichever is higher. If your spouse is deceased, you either get the higher of your own retirement benefit or the full amount of your spouse’s or ex.

Take the time to figure out what’s coming to you when you retire.