Will Social Security be there when you retire? How do you maximize your benefits? Andy Landis, one of the foremost experts on Social Security, answered these questions and many more when he spoke at LNMW for two whole hours yesterday. Some key takeaways:
Worst-case scenario is a 23% cut in benefits for those collecting Social Security after 2033, said Andy. That’s the year the system is likely to have used up all its surplus and be totally reliant on payroll taxes. To maintain current benefit levels, it would take a 1.6% total increase in payroll taxes (half paid by workers and half by employers), he noted. But he thinks that by 2033, we’re likely to get some sort of compromise between cutting benefits and raising taxes, similar to what Uncle Sam did in 1984 to avoid bankruptcy.
Don’t assume benefits will be always higher if you keep working through your 60s. As long as you’ve paid into the Social Security system through payroll or self-employment taxes for at least 10 years (even working part-time or occasionally) you can collect. However, the amount you collect is based on the AVERAGE of your best 35 years of work (in terms of earnings). So if you have decades of no or low earnings (as many stay-at-home parents have), a high-paying job later in life may not make a huge difference in benefits. The maximum monthly benefit was recently $2,431 and the lowest was $924. Also, you can continue working and collect Social Security, but your benefits will be reduced if you earn more than $15,480 annually.
Check on your estimated Social Security benefits any time. If you create an account at the official Social Security website — you can access your Social Security statement, showing earnings history, estimated benefits and a bunch of other info.
You can maximize Social Security payouts if you plan ahead. One such strategy is to file for benefits at your full retirement age (65 to 67, depending on when you were born), and immediately suspend payment. Until age 70, your benefits will then increase by 8% annually. (If you’re married, only one of the spouses can suspend, not both). And…any time before age 70, you can change your mind about suspending and collect the amount due to you for the prior years in suspension. Few people realize this, emphasized Andy. The AARP provides a useful online Social Security Calculator for comparing payout strategies.
An updated version of Andy’s book, Social Security: The Inside Story (2014 Edition), is just out. It’s a great resource that we use here at LNWM.