Soc Sec

By Joel Dresang

About the time Social Security was emailing my annual reminder this spring, the agency’s inspector general was issuing a report to Congress showing how much Americans ignore information that is critically important to retirement.

The report explained efforts to provide individualized Social Security Statements online. Based on Census estimates, though, only 6.7% of those eligible for an online Social Security account registered for one and used it in the year that ended Sept. 30.

I happen to be one of those few. Social Security emails me several weeks before my birthday each year to remind me to securely log in to my account and review my Social Security Statement.

First, I check the numbers reported for my annual earnings. If they look off, it could be a sign that either there’s a miscommunication with my employer’s payroll or, more likely, someone might be using my Social Security number through identity theft.

Even more importantly, though, my Social Security Statement allows me to peek ahead at how much I can expect in monthly benefits if I decide to retire

  • early, at age 62
  • or when I’m eligible for my full retirement payment at 66 and eight months
  • or at 70, when benefits max out

Just doing the math, I found that retiring at 70 would boost my payment 29% higher than at 66 and eight months—and 86% higher than at 62.

Checking my statement gets me thinking about how else my wife and I could fund our retirement: Pensions, my 401(k), her IRA, a Roth IRA, other investments, part-time work. Although the Social Security segment changes little year-to-year, the review prompts me to check our progress on the other accounts.

The future of Social Security

A couple of weeks after my birthday, the Social Security trustees reported on the trust fund set aside to cover retirement benefits. They said the fund peaked in 2017 at a surplus of $2.9 trillion and is on track to zero out in 2034.

That’s 15 years from now, when I expect to be receiving retirement benefits from Social Security. I still expect to collect, though—even if the trust fund is exhausted.

Administration forecasts say that if nothing else changes, annual Social Security tax revenue—collected from workers and employers, just as it is now—should cover about 77% of the annual retirement benefit payments. To get 100% of expected benefits covered after 2034, Congress has to agree to a) raise revenue for Social Security, b) reduce payments or c) both.

A lot of misunderstanding surrounds Social Security, including some hysteria over its funding, which fuels erroneous impressions that people are paying into a system from which they will never benefit.

Despite reasoned assurances to the contrary, 42% of Americans believe there will be no Social Security for them when they retire, according to a Pew Research Center survey reported in March. In a separate poll in March by Gallup, 67% of respondents said they actually worry about Social Security.

Of course, fear often makes us foolish with our finances. Whether out of fear or out of ignorance, we tend to underestimate the value of Social Security.

The role of Social Security

In nearly 20 years of surveys, Gallup has found a “consistent tendency for Americans to discount Social Security when looking ahead to retirement—even as Social Security becomes an important source of income once they do retire.”

Fifteen years ago, 37% of respondents between ages 50 and 64 told Gallup they would expect Social Security to be their major source of retirement income. But in retirement, 15 years later, 61% said they actually rely on Social Security as their major source of income.

I figure that at the full retirement amount, Social Security would account for about 46% of my income, followed by retirement funds and other savings at 43% and a pension from a previous employer at 11%.

That surprises me. I wasn’t expecting Social Security to play the leading role.

To create a Social Security online account or sign in, go to:

However, my calculation is based on current account levels, and while I don’t expect Social Security to change much year-to-year, my wife and I continue to squirrel away earnings for our retirement accounts. And, we expect those investments to keep growing so that our savings should exceed Social Security as a source of retirement income.

But the point is that we shouldn’t underestimate the value of Social Security in our retirement planning. Nor should we count on Social Security to replace our earnings. The average retirement benefit is about $17,600 a year.

Social Security was never meant as a be-all-end-all retirement support. Begun in the Great Depression, when unemployment reached 25%, Social Security was started in part to let older workers afford to retire so that younger job seekers could have a chance to work.

Social Security remains a key supplement to the money we’re investing for our retirement. Keeping tabs on that—through the convenience of the Social Security Statement online—helps us stay mindful of our progress. Recent research even suggests that those who read their statements make better use of the benefits available to them by working longer, if they can, and postponing their claims.

Other Money Talk articles from Joel Dresang

Yes, the trust fund for Social Security retirement benefits is starting to shrink. For demographic reasons, the system is beginning to take in less each year than it’s paying out, which hasn’t happened since 1982.

Without congressional intervention, individual payments projected by Social Security could eventually get smaller, but they’re not going away. Either way, rather than fearing Social Security’s demise or ignoring it out of apathy, more Americans would be better off registering for an online account and making use of the information in their Social Security Statement.

Joel Dresang is vice president-communications at Landaas & Company.

Learn more
Working longer to fatten Social Security, A Money Talk Video with Lisa Lewitzke
Planning retirement via Social Security, A Money Talk Video with Lisa Lewitzke
Social Security: Know your optionsA Money Talk Video with Lisa Lewitzke
When Should I …check my Social Security Statement?
A Social Security guide on when to start receiving retirement benefits
Benefits calculators, from the Social Security Administration
Frequently Asked Questions, from the Social Security Administration
“When to Take Social Security Benefits: Questions to Consider,” from the National Academy of Social Insurance
Get online with Social Security, by Joel Dresang
Retirement Insurance at 75, by Joel Dresang
(initially posted May 30, 2019)

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