When it comes to Social Security, the sky is not falling.
Yes, there’s a projected shortfall, but however the system is fixed – and it will have to be – Social Security will likely remain a vital part of most Americans’ retirement. “Eighty-one years after President Franklin Roosevelt signed the Social Security Act on August 14, 1935, Social Security remains one of the nation’s most successful, effective, and popular programs,” the Center on Budget and Policy Priorities wrote recently.
Check out these facts from Social Security:
• 61 percent of aged beneficiaries received at least half of their income from Social Security in 2014.
• 5.4 million people were newly awarded Social Security benefits in 2015.
• 60 million beneficiaries last year received Social Security benefits.
• Social Security paid benefits of $886 billion in 2015.
But despite Social Security being a key benefit for millions of Americans, many people don’t understand how the system works. They are worried it won’t be around long enough for them to collect benefits. And some make mistakes that can cost them money.
You labor so hard paying into the system that it’s important you learn what you are entitled to collect. I recommend reading “Making Social Security Work For You: Advice, Strategies, and Timelines That Can Maximize Your Benefits” (Adams Media, $17.99) by Emily Guy Birken.
Guy Birken is a personal finance blogger. She brings her breezy blogging style to help explain a system that can be mind numbing.
“Navigating the complex Social Security system and its labyrinth of obscure rules to get the most from its benefits is beyond both the patience and skills of the average senior,” she writes. “As a result, many Americans who rely on Social Security as their chief source of income receive an amount that is smaller than it should be.”
Guy Birken starts off by setting the groundwork for why Social Security is important while dispelling the myths and addressing the critics.
I love the way the book is organized, and also that there is a takeaway summary after each chapter. Guy Birken first walks you through what Social Security is and isn’t. It is important to understand that social security at its core is insurance.
“Like private insurance, social insurance helps spread out the risk of an individual loss among a larger group, thereby protecting the most vulnerable in society,” she writes.
From the genesis of the system Guy Birken jumps to its present problem. Total income in the system is projected to exceed its total cost through 2019.
In its latest report, the Social Security Board of Trustees said reserves for the combined trust funds – Old Age and Survivors Insurance and Disability Insurance – will be depleted in 2034. If there are no changes to address the shortfall, there will only be enough income to cover 79 percent of scheduled benefits.
It’s that prediction that puts people in a panic. But Guy Birken argues that the system’s vulnerabilities are exaggerated.
She also provides possible solutions to cover the shortfall, which admittedly won’t go over well with a lot of folks. She also discusses such ideas as raising Social Security payroll taxes, reducing benefits, or increasing the full retirement age – again.
Don’t shout at me. Something’s got to give.
Past the history and current events lessons is the meat of the book: The nuts and bolts of claiming your benefits. Here are some of the topics she covers:
• The pros and cons of taking early benefits.
• Figuring out how you can afford to delay to maximize your benefits.
• Understanding benefits for single individuals, married couples, divorcees and survivors.
The final chapter in the book provides a handy top-10 list of Social Security pitfalls and problems. (Guy Birken’s a former educator, so she likes to recap.) It’s a nice feature.
First on the list of pitfalls is letting fear dictate when you take your benefits. “I think we can all agree that fear-based decision-making does not lead to the best outcomes,” she writes.
The second pitfall is one many of us already know: Don’t rely too much on Social Security.
She writes: “Basing your retirement income plans upon benefits that are a particular size is a recipe for disappointment or a rage stroke if the rules change within a few years of your own retirement.”
This is a guide you’ll want to have as you head into retirement.
Copyright 2016, Washington Post Writers Group.