Social Security has a way of making people nervous long before they’re ready to collect it.
Is the money going to run out? Should you take benefits early, just in case? And what if you miss your window?
Financial advisors Austin Costello and Neil Cain from Capital Financial Planners helped separate fear from fact on this episode of Fed Thread. Some of their answers challenged assumptions heard for years.
Here are just a handful of the reality checks worth considering before you make a decision that could affect your retirement income for decades.
- If the trust fund runs out, will the checks stop?
Costello explained that even if Social Security’s retirement trust fund reserves were totally depleted, incoming payroll taxes would still cover an estimated 78 to 83 percent of scheduled retirement benefits, based on the figures discussed in our conversation.
While that would still mean a significant shortfall, it does not mean Social Security goes “bankrupt,” and benefits disappear altogether. The long-term funding problem is real, and Congress still has hard decisions to fund it, but “running out of money” is far from the full story.
- Is claiming at 62 the safest bet?
It might feel that way if you’re worried about Social Security’s future, but taking benefits early generally means a permanently smaller monthly check.
For people born in 1960 or later, full retirement age is 67. Cain explained that, under the standard benefit calculations discussed in our conversation, waiting until 70 can mean a monthly benefit 77 percent higher than claiming at 62.
While that’s an enticing difference, it also doesn’t automatically make waiting the right move for everyone. Health, cash flow, your spouse’s circumstances and how long you live all matter. The key is understanding the trade-offs, not making a decision out of fear.
- Does Social Security start paying you automatically at 70?
No, which catches some people off-guard. People generally need to apply for benefits, even if they’ve waited until 70. Cain and Costello’s rule of thumb is to start the application process about three months ahead.
In other words, don’t assume your birthday triggers a payment. A little planning can help prevent an avoidable delay.
- Have you checked the earnings record behind your benefit?
While we would all like to assume government gets it right 100 percent of the time, the reality is that there can be errors in the accounting of what you’ve paid into Social Security, which can affect what you collect.
As a practical step, Costello recommends creating an account at SSA.gov today, regardless of how far out you are from retirement, and reviewing your earnings history. Checking now gives you time to investigate discrepancies while you may still have records like old W-2s.
Are you a little surprised?
For more Social Security advice, plus a detailed explanation of why the fund is dwindling faster than planned and the tough decisions Congress must choose from to make it whole, listen to the full Fed Thread episode.
And for more finance insights from Capital Financial Planners, visit their website and YouTube page.
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