Retirement planning involves many different factors. Here we break down what's true and false for one the biggest factors, your Social Security benefits.
Social Security is the federal safety blanket that everyone has been paying into since 1935. Designed to ensure people have some support when they retire, the plan has seen its fair share of troubles as the question on how to keep it going has yet to be answered.
This debate has led to various notions about what Social Security is and what it means for your retirement. We take a look at four of these common beliefs and tell you if you should accept them or not.
Belief: Social Security won’t be around for anyone retiring in the next 20 years
False: Even if there is no plan put in motion by 2034 there will still be enough funds to pay 79% of the promised benefits that year. The reserve trust funds allow the benefit payouts to not go lower than what they are now, but once they’re gone payouts will decrease.
The Social Security program itself is kept afloat by payroll taxes, so as long as people are working Social Security will exist. It just won’t be able to give out the same benefits that it can now.
Belief: If you claim benefits early they will be reduced
True: You can start collecting your retirement benefits at 62, however, they will be reduced based on how many months are in between 62 and your full retirement age.
For instance, if you were born between 1943-1954 your full retirement age is 66, according to the Social Security Administration. With 48 months between 62 and 66 they will reduce your retirement benefit by 25%.
You can also choose to work as you collect Social Security early. However, Social Security will deduct $1 from your benefit payments for every $2 that you earn above the annual salary limit. The annual limit changes each year and for 2018 is $17,040.
Belief: Social Security isn’t available for your full retirement
False: Despite all of its troubles, Social Security is guaranteed income for life and is protected from inflation. According to the 2018 Nationwide Social Security Consumer Survey the majority of Americans are not aware of this.
It’s important to take full advantage of this benefit and use it as a part of your retirement plan. Granted, the reality of the program is that it can’t support your full retirement, but there are suggested fixes that could be put in place by 2034.
Belief: You can wait to collect your Social Security benefits later than 62
True: You have until you hit 70 to start collecting your benefits, and the longer you wait the more they will increase. For example, anyone born in 1943 or later will see their benefits increase by 8% each year from full retirement age until they start collecting benefits at 70.
You can adjust your retirement plan accordingly to maximize the potential benefits. If you continue to work at full retirement age Social Security will deduct $1 from your benefits for every $3 you earn above the annual limit, which does change each year. For 2018 its $45,360. This isn’t as low as the annual salary limit when you collect at 62 and still work.
Social Security isn’t the retirement safety net it once was. Even so, knowing the truth of what it can actually do for you will give you the extra financial security you need in your golden years.
FOR MORE on planning for retirement:
- Create Your Own Pension Using an Economist-Recommended Method
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What to Believe and Not Believe When Talking About Social Security
Social Security is in trouble but can still help your retirement plan. We look at common beliefs people have and examine if they are true or false.
Retirement planning involves many different factors. Here we break down what's true and false for one the biggest factors, your Social Security benefits.
Social Security is the federal safety blanket that everyone has been paying into since 1935. Designed to ensure people have some support when they retire, the plan has seen its fair share of troubles as the question on how to keep it going has yet to be answered.
This debate has led to various notions about what Social Security is and what it means for your retirement. We take a look at four of these common beliefs and tell you if you should accept them or not.
Belief: Social Security won’t be around for anyone retiring in the next 20 years
False: Even if there is no plan put in motion by 2034 there will still be enough funds to pay 79% of the promised benefits that year. The reserve trust funds allow the benefit payouts to not go lower than what they are now, but once they’re gone payouts will decrease.
The Social Security program itself is kept afloat by payroll taxes, so as long as people are working Social Security will exist. It just won’t be able to give out the same benefits that it can now.
Belief: If you claim benefits early they will be reduced
True: You can start collecting your retirement benefits at 62, however, they will be reduced based on how many months are in between 62 and your full retirement age.
For instance, if you were born between 1943-1954 your full retirement age is 66, according to the Social Security Administration. With 48 months between 62 and 66 they will reduce your retirement benefit by 25%.
You can also choose to work as you collect Social Security early. However, Social Security will deduct $1 from your benefit payments for every $2 that you earn above the annual salary limit. The annual limit changes each year and for 2018 is $17,040.
Belief: Social Security isn’t available for your full retirement
False: Despite all of its troubles, Social Security is guaranteed income for life and is protected from inflation. According to the 2018 Nationwide Social Security Consumer Survey the majority of Americans are not aware of this.
It’s important to take full advantage of this benefit and use it as a part of your retirement plan. Granted, the reality of the program is that it can’t support your full retirement, but there are suggested fixes that could be put in place by 2034.
Belief: You can wait to collect your Social Security benefits later than 62
True: You have until you hit 70 to start collecting your benefits, and the longer you wait the more they will increase. For example, anyone born in 1943 or later will see their benefits increase by 8% each year from full retirement age until they start collecting benefits at 70.
You can adjust your retirement plan accordingly to maximize the potential benefits. If you continue to work at full retirement age Social Security will deduct $1 from your benefits for every $3 you earn above the annual limit, which does change each year. For 2018 its $45,360. This isn’t as low as the annual salary limit when you collect at 62 and still work.
Social Security isn’t the retirement safety net it once was. Even so, knowing the truth of what it can actually do for you will give you the extra financial security you need in your golden years.
FOR MORE on planning for retirement:
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With an early start and some wise planning, clinicians can expect to be well prepared when it comes time to retire from practicing.
Your Retirement Lifestyle? It’s What You Create for Yourself!
The best time to start saving for retirement? Right now.
Selling Or Merging with the DSO/OSO Can Create Positives and Maybe Some Negatives
Reductions in retirement plan adoptions and medical insurance premiums are some of the many things to consider when owners of solo practices look to switch to the DSO model.
Dentists Should Be Aware of What Defined Benefit Retirement Plans Can Do for Them
The employer sponsored qualified retirement plans, especially the defined benefit plan, can be very helpful as a tax shelter for clinicians.
Digging Into Employer Qualified Retirement Plan Options
A little homework and help from an expert can help clinicians choose the right benefit plan and the ideal amounts to be deposited.
Dentist – Lead Thyself
Create a culture in your practice that ensures your team feels respected, valued, and safe.
The Dental Retirement Runway
With an early start and some wise planning, clinicians can expect to be well prepared when it comes time to retire from practicing.