How should Social Security fit into your retirement plan? Should you include it at all? And how can you maximize its benefits? Here's what every American needs to know, no matter what age they are.
Should You Ignore Social Security?
There is a lot of contradictory news about Social Security's finances and its ability to pay out benefits. But it's vital to dig more into the actual situation. Expert projections do, indeed, indicate that the Social Security trust fund may be exhausted as early as 2035. However, it would still receive current income through payroll taxes to pay a large percentage of benefits.
This means that a person who ignores Social Security based on the idea that they will get nothing does themselves a disservice. While it's less stable than it once was, it continues to be a useful retirement planning tool.
Is Social Security Enough?
On the other end of the spectrum are those who may overestimate the value of their Social Security benefits. Social Security, in fact, was never intended to be the only — or even the main — source of retirement income. It was created to reduce poverty among the most vulnerable Americans. However, its intent was to be part of a three-legged stool composed of Social Security, pensions, and private savings.
If you fail to include those other legs of your retirement planning stool, you create a precarious situation for yourself.
How Can You Max Social Security?
Social Security instability and the disappearance of traditional pensions mean it's more important than ever to maximize what you get from it. How can you do this?
First, married and formerly married persons should learn more about spousal benefits. You may be entitled to a larger check by claiming against a spouse instead of your own earnings history. Second, check your Social Security balances each year. Errors do happen, so ensure that all your income is credited properly to you.
Next, craft a retirement date that maximizes how large your check is. While you can claim it early, you get significantly lower benefits. Waiting until age 70 results in a huge raise for life. However, claiming after that age may gain nothing further for you.
Finally, integrate Social Security projections into your overall retirement plan. This will help you avoid having to claim too early, keep taxes as low as possible, and invest any overages wisely.
Where Can You Learn More?
Retirement planning in the United States is complex. Understanding how Social Security benefits should or shouldn't fit within it is even harder. Get help by meeting with a retirement planning professional in your state today.