Financial planning tools and services to put you on the path to the future you want
Your guide to financial planning and retirement
Connect with peers and experts
Get to know the people behind the company and the mission behind the work
Offer financial wellness to the people at the heart of your business
October 13, 2022
Most of us count down the days, months, and even years in anticipation of starting Social Security. In fact, besides qualifying for Medicare, perhaps the retirement event many most look forward to is the day we can start receiving these benefits.
Song lyrics come to mind:
Anticipation. Anticipay ay.. tion… It’s makin me wait. It’s keeping me wai ay ay ay ay ay ay ay ya tinCarly Simon
Anticipation. Anticipay ay.. tion… It’s makin me wait. It’s keeping me wai ay ay ay ay ay ay ay ya tin
However, retirees today may be relying too heavily on Social Security, and starting the benefit too soon. With prices skyrocketing, it is especially tempting to supplement income by starting Social Security as soon as you can. However, they are so many reasons to wai ay ay ay ay ay-t.
According to the Social Security Administration (SSA), “Your Social Security benefits are the foundation on which you can build a secure retirement.”
However, the SSA advises that this paycheck is designed to replace only about 40% of 70% of your pre-retirement income. (Social Security assumes that you will only need 70% of your pre-retirement income and that benefits should only represent about 40% of that income in retirement.)
So, if you earn $50,000 a year before retirement, then you would plan on spending $35,000 a year in retirement and Social Security is designed to represent 40% of that income need — $14,000.
If you earn more than average, then you should plan on Social Security replacing less — sometimes much less — than 40% of your retirement income need. For example, if you earned $150,000 before retirement, your estimated monthly Social Security would be between $2,000 and $3,000 a month or $36,000 a year.
If you earn less than average, then Social Security may replace slightly more of your income need.
According to Social Security’s Fast Facts 2022, seniors are much too reliant on Social Security benefits. According to the report: Among elderly Social Security beneficiaries, 37% of men and 42% of women receive50% or more of their income from Social Security.
What’s worse? 12% of men and 15% of women rely on Social Security for 90% or more of their income.
According to a report by the Center for Retirement Research at Boston College and analysis from the Social Security Administration, more people are now waiting to claim Social Security.
However, the majority claim before the full retirement age of around 66:
Depending on your income history and when exactly you start benefits, if you claim early could be giving up $100,000 or more in benefits over your lifetime. One hundred thousand dollars! That is a lot of money!
If you have not yet started your Social Security, the best thing you can do to live more comfortably is to wait to claim your benefits. Think about how much you are gaining and giving up by waiting.
You can claim full benefits when you reach your Full Retirement Age (FRA). The full retirement age is 66 if you were born from 1943 to 1954. The full retirement age increases gradually if you were born from 1955 to 1960, until it reaches 67. For anyone born 1960 or later, full retirement benefits are payable at age 67.
Delaying benefits is a good Social Security decision for anyone — you just get more money every month the longer you wait to start getting payments.
However, if you are married, you may have an additional incentive to delay benefits. If one of you dies before the other then the surviving spouse will get to make a choice about which Social Security benefit to receive. (A surviving spouse is entitled to just one benefit — not both.)
Rule of Thumb: There is a simple rule to follow if you are married and want the best for your spouse: The highest earner in the couple should defer the start of benefits as long as possible up until the maximum retirement age of 70. Don’t focus on who is older. Or, who retires first? The key is to make sure the highest earner grabs the highest possible payout.
While retirees today are probably overly dependent on Social Security benefits, there are a lot of options for achieving a secure retirement plan — regardless of Social Security.
The NewRetirement Planner can help you discover opportunities. Explore options like reducing expenses, tapping home equity or working a little bit longer and immediately see the impact on your current and future finances. This tool was named a best retirement calculator by the American Association of Individual Investors (AAII). Forbes Magazine calls it “a new approach to retirement planning.”
The tool includes the Social Security Explorer which makes it easy to see how to maximize your Social Security benefits.
However, if all else fails, you might want to explore 11 Ideas for Living on Nothing More than Social Security in retirement.
Do it yourself retirement planning: easy, comprehensive, reliable
Take financial wellness into your own hands and do it yourself retirement planning: easy,
Share this post:
The Social Security cost of living adjustment (COLA) for 2023 is 8.7%. Learn why this might almost feel like enough.
Your benefits are determined by your Full Retirement Age (FRA), your benefit amount and FRA and the age when you decide to start benefits.
What’s the highest Social Security benefit? Will you qualify? Get easy answers for a wealthier retirement.
Our weekly newsletter full of inspiration, podcasts, trends and news.
© 2023 NewRetirement, Inc. All rights reserved.
Disclaimer: The content, calculators, and tools on NewRetirement.com are for informational and educational purposes
only and are not investment advice. They apply financial concepts in a general manner and include
hypotheticals based on information you provide. For retirement planning, you should consider other
assets, income, and investments such as equity in a home or savings accounts in addition to your
retirement savings in an IRA or qualified plan such as a 401(k). Among other things, NewRetirement
provides you with a way to estimate your future retirement income needs and assess the impact of
different scenarios on retirement income. NewRetirement Planner and PlannerPlus are tools that
individuals can use on their own behalf to help think through their future plans, but should not be
acted upon as a complete financial plan. We strongly recommend that you seek the advice of a financial
services professional who has a fiduciary relationship with you before making any type of investment or
significant financial decision. NewRetirement strives to keep its information and tools accurate and up
to date. The information presented is based on objective analysis, but it may not be the same that you
find on a particular financial institution, service provider or specific product's site. All content,
tools, financial products, calculations, estimates, forecasts, comparison shopping products and services
are presented without warranty.