Get to Know Social Security

Social Security stands ready to pay 100 percent of benefits from 
now through 2033.

By Ray Tenpenny On Apr 4, 2014

As the youngest of the boomer generation turns 50 this year, Americans are focusing on their retirement – and how to fund it. According to the recent Merrill Edge® Report, 66 percent of those surveyed in New Jersey plan to at least partially rely on public sector support to fund their retirement. But recent confusion around Social Security has left many unsure about what can – and can’t – be expected from Social Security benefits.

Social Security is not “going out of business”: Many – specifically younger generations – have heard a great deal of news about Social Security and lost confidence that the program will be available when they retire. But perception may not be reality.

The latest report by Social Security trustees says Social Security stands ready to pay 100 percent of benefits from now through 2033. If nothing changes policy-wise, from that point Social Security will have enough money to cover 75 percent of promised benefits.

Social Security was never meant to cover all of retirement income for most Americans: Designed as a “safety net” program to replace about 40 percent of pre-retirement income, Social Security is a base level of protection and must be supplemented. For today’s average worker, the program replaces about 39 percent of pre-retirement income.

To make up the difference, Americans should save and invest during working years, consider lifestyle changes and think seriously about working in retirement.

Americans may be overly optimistic about how long they can work: Eight in ten pre-retirees are counting on employment to be a major source of income when they retire, yet research shows that their expectations may be overly optimistic. In a recent retirement survey, 70 percent of people who were already retired said they had planned to work in retirement, while fewer than a third actually did.

There may be value in waiting to claim benefits: Deciding when to collect should be a deliberate and strategic individual choice supported by research and discussion with professional advisors. But many people don’t realize that deferring Social Security payments ultimately leads to bigger monthly checks. Benefits grow by approximately eight percent each year from age 62 to age 70, when growth levels off.

It can be hard to defer those Social Security payments, but it may pay off for those who are able to do it.

Americans need to define their individual retirement: Each individual needs to define what retirement is for him or her and then work with a professional to strategize how to get there and evolve it over the years. Factoring Social Security into a retirement plan is just part of identifying how to fund it.

About the Author

Ray Tenpenny is a regional sales manager with Merrill Edge, which offers team-based advice and guidance brokerage services. He can be reached at 908-709-7667 or [email protected].

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