The Basics of Social Security
Podcast Transcription:
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Maddy: Did you know that more than 65 million Americans receive social security benefits? And that’s what we’re going to talk about today- some basics about social security. Thank you for joining me on this episode, as always, I’m your host Maddy and today I’m excited because we have a guest to talk about this topic, Nicholas VanGeest. He is a certified financial planner and is here to share his expertise on social security. Welcome! Could you tell us a little bit about yourself?
Nick: Hi Maddy! Thank you for having me on the podcast! As you stated, my name’s Nick VanGeest and I’m a certified financial planner. I have an office right inside the Portland branch of the credit union but travel to the other branches as well by appointment. I started working at PFCU in 2010 and I spend most of my time working with members individually on comprehensive retirement planning. Since social security is designed to replace about 40% of your working income, it’s obviously a pretty large component to the retirement planning process and is a point of emphasis in conversations that I have with members.
Maddy: Awesome! Well thank you so much for joining us today. Let’s dive right in. I think at one time or another we’ve heard that social security benefits are dwindling, especially for the younger generations. Can you shed some light on why that is and what those benefits may look like for this close to retiring as well as those, like myself, that still have at least 30-35 working years left.
Nick: Sure, yeah. So there are sort of a number of factors at play here in why the social security system is struggling. For one, the system was set up in 1935 and at that time life expectancy was age 63 and the earliest you could draw social security was age 65 so more than half of people, statistically, never collected a single social security payment under that system. Now many people begin collecting between the ages of 62 and 70 and on average live for another 19 to 21 years. A second major reason the system is pressured right now is that the baby boomer generation is reaching retirement. There are roughly 10,000 boomers retiring each day. There just are aren’t enough younger people entering the labor force to offset the number of retirees collecting their benefits. When the system was initially created, there were about 16 workers paying into social security for each person collecting. Today, there are fewer than 3 workers for each social security recipient. Additionally, on the installment of the system, it was only designed for retirees. Now the program includes disability recipients, family benefits, and survivor benefits. As far as what this looks like for future generations collecting their benefits, it means that at some point there will have to be a change. This could be a restructuring of how the system is funded or it could mean reduced benefits for those receiving benefits. It also could mean changes to the ages participants are allowed to start receiving their benefits. Current estimates are that by 2035 social security will only be able to fund about 79% of scheduled benefits.
Maddy: Wow, it’s so interesting to hear how much things have changed since it’s started. I mean, especially, 10,000 boomers retiring each day just seems like a crazy amount so I can definitely see how that system’s feeling pressured. So, how can someone find out about their social security benefits?
Nick: Well in the past you may recall receiving a social security statement in the mail, right around your birthday each year. The government realized this was largely a wasted expense since most younger folks won’t really have too much concern about benefits that are decades away. Now the social security administration will send out statements to you starting at your 60th birthday and they’ll continue sending those out each year until you start collecting benefits. If you’re under age 60, you should sign up for an account at SSA dot gov and then at least annually you should log in and review your statement. Page three of the statement shows your earnings history which you should review for any errors. If there are mistakes, and sometimes there are, it could impact your lifetime benefit.
Maddy: Okay, so it sounds like it’s really important to be checking that statement every year, that’s good to know. I think the questions on most people’s minds, especially as they approach retirement age, is when can they start receiving benefits?
Nick: The earliest that you can file for benefits right now is age 62 and the latest you can claim benefits is age 70. Starting your benefit at age 62 results in a much lower lifetime benefit than waiting until your full retirement age. On the other hand, waiting until age 70 will give you the largest lifetime benefit amount. Many factors including current employment, life expectancy and financial need will be factors that help determine your ideal filing age. There is one caveat to the age 62 filing age that could affect widows. For those who have lost a spouse, there may be a benefit that could start as early as age 60. These filing strategies are very complicated and you should consult the help of a professional before making any filing decisions.
Maddy: So what would you say to those that would prefer to continue working after retirement? Is it possible to do so and still receive social security benefits?
Nick: It is but there are some restrictions that should be taken into consideration before filing for your benefit. If you’re between the ages of 62 and full retirement age, which full retirement age varies between age 65 and 67 depending on the year that you were born, there’s an earnings limit applied to your employment income. The earnings limit, which changes each year with inflation, will dictate how much money you can earn from employment before having your social security benefit reduced. If you employment earnings will be above that threshold, you might want to delay your benefit. Once you reach your full retirement age, which currently varies between age 66 and 67, you’ll be permitted to make an unlimited amount from employment and collect your full social security benefit without a reduction.
Maddy: You’ve shared a lot of great information. Going from here where can someone go to get advice on the various filing strategies and which one might make the most sense for them?
Nick: That is a great question! Most people think that they can call the social security office and receive advice. While the representatives there are fairly helpful at relaying to you the facts about your individual benefits, they’re not authorized to give any advice as to which filing strategy might be best for you. And this makes sense due to the number of factors that could impact your lifetime benefit. To make an informed decision, you’ll want to talk to your financial professional about all the factors effecting your retirement income planning like your life expectancy, retirement savings, tax implications, spousal considerations, dependents and more.
Maddy: So for all of those PFCU members out there, can they speak to you about their filing options?
Nick: Absolutely! One of the main resources and conveniences available to PFCU members is the wealth management department. In our department we take a comprehensive approach to financial planning through proven processes. Members of the credit union are entitled to a complimentary consultation to determine their eligibility for the services offered by our department. You can call to schedule a time to meet or schedule a virtual consultation right from the wealth management page of the PFCU website.
Maddy: That’s right! This is a wonderful resource and service offered by PFCU. So if you want to schedule a time to meet with our wealth management department you can visit our website it’s PFCU the number four me dot com or you can call 844 517 3611. Alright, thank you for your time again on Money Talk today.
Nick: Yeah, thanks for having me!
Maddy: And that’s all we have for this episode of Money Talk, thank you all for listening!
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