I feel like Social Security has a bad rep…
Depending on whom you listen to, it is quite possible that Social Security is going to run out of money soon, leaving every retiree without the income on which they have come to depend.
Other, less dramatic voices are concerned the government is going to “cheapen” the benefit through higher taxes, lower benefits, or higher wage limits (for more on Social Security click here).
Whatever the reason, Social Security has become the punching bag over the past several years. Without a defense, it has become an easy target.
Am I here to say the system is perfect? Absolutely not. Will the system need to be changed, updated, or altered moving forward? It’s possible. But in its current form, Social Security does provide extremely valuable and often necessary income to millions of retirees.
Because of that, I am here to stand up for the system and talk about 7 reasons you should love Social Security. To loosely paraphrase one of the girlie 80’s movies N likes to watch on repeat, “Nobody puts Social Security in the corner….”
1 – A Raise In Your Payment
Every month you wait to collect social security payments, your monthly payments get larger. As you wait past your full retirement age (around 66 for most people), your annual benefit goes up by 8% per year. That’s a raise of 8% per year on your money… promised by the US Government. When was the last time your employer promised to give you a raise of 8%?
2 – A Lifetime of Income
Social Security is set to pay you for your life. Whether you live until 70, 80, 90, or longer, the system will pay you. I tell my clients social security income is one of the best (if not the best) hedge against the risk of living too long. You can’t outlive social security.
3 – A Hedge Against Inflation
Not only is your money going to last you for your lifetime, but Social Security gives you a raise along with inflation. If there is no inflation, you likely will not get a raise. When there is inflation, Social Security will adjust your income accordingly. In 2014 the increase was 1.5%. You might hear 1.5% and not be impressed. But you know what it is better than? Zero. Zilch. Nothing. I think you get my point.
4 – A Spousal Benefit
A non-working spouse is entitled to 1/2 of a working spouse’s benefit. If the spouse does work and earns enough credits to qualify for benefits larger than the 1/2 benefit, they get that instead (it’s almost like you can’t lose). But knowing the worst case is 1/2 of the benefits is a good baseline. Let me repeat my eloquent quote from #3…..1/2 of the benefits is better than zero, zilch, nothing.
5 – A Survivor Benefit
When you die, your spouse is entitled to the higher of 1) their benefit or 2) the deceased spouse’s benefit. The surviving spouse can forgo their benefit if smaller and elect the deceased spouse’s higher benefit. The system also includes benefits for families with children under 18 who lose a parent.
6 – An Option to Plan
Social Security allows you to access your retiree benefit as early as 62. The system maximizes your benefit at age 70. At any point during this period you can elect to start collecting. But it may not be that simple. By analyzing your retirement need, you can optimize your benefits implementing a strategy known as start and suspend. This allows you to collect on your spouses benefit while yours continues to grow. Ultimately, this may lead to thousands more in income paid to you and your spouse over your combined lifetimes.
7 – Flexibility
Social Security allows you to suspend your payment after you start collecting. If you decide to go back to work and don’t need the money, you can suspend your payment and it will continue to increase. The system also allows you to payback your benefits in order to collect a larger benefit in the future. Simplified, they give you a “redo” if you want to change your decision.
Inflation is the rise in the prices of goods and services, as happens when spending increases relative to the supply of goods on the market.