Understand the pros of Social Security and how it can help you live a rich retirement life!
In this article:
- Claiming Your Retirement Benefit Too Early
- Consequences of a Simple Mistake
- Pros and Cons of Social Security
- Social Security’s Top 3 Advantages You Need to Know
Pros of Social Security as Your Retirement Plan
The Issue With Claiming Your Retirement Benefit Too Early
For more than 15 years, I’ve helped people just like you find a “better way” into retirement.
I’ve consulted clients one on one about financial planning, written books on health and wellness, spoken at conferences, and done interviews on major TV news networks.
But I’m most excited to share my insights and strategies on retirement with you here in Rich Retirement Letter — nearly every single day.
And today, we kick things off with our very first issue.
This couple faced problems with their pension after getting wrong advice from their broker. Let’s take a look at their situation.
Miles and Gloria are ages 64 and 62 respectively. Gloria has a bad back and she knows she wants to retire early at age 62, but they don’t know if they have enough money saved. They know they need an income of $70,000 a year after taxes, and according to life expectancy calculators, they can expect to live until ages 86 and 89, respectively.
Should they retire and withdraw the money from their retirement accounts while letting their Social Security benefits grow? Or should they file early for their Social Security so they don’t have to take out as much from their portfolio assets?
Miles and Gloria don’t know, so they go in to talk with their broker. He calculates that with the average rate of inflation at 3% and their accounts averaging a 6% return, they can go ahead and start their income withdrawals. “I’ll get it all set up for you,” he tells them.
“Great,” says Miles. “But what about our Social Security?”
“What about it?”
“When should we file? Do we wait and take out more of our portfolio money now? Or should we go ahead and file so we don’t have to take out as much money?”
The broker shrugged his shoulders. “I don’t know,” he said. “Everybody breaks even around age 84 anyway, so what does it matter? Wouldn’t you rather file now so that you’re taking out less money from your portfolio? That way, I can keep the money growing for you.”
That made sense to Miles and Gloria, so they went ahead and filed early for their Social Security benefit. They received a total of $34,000 a year, and the remaining $36,000 they pulled from their investment portfolio.
The years went by and their income need gradually went up as the rate of inflation continued to rise. At 20 years into their retirement, Miles was 84 and Gloria was 82, they realized they were in trouble. They had enough money in their portfolio to give them one more year of income. After that, they would have to take an income cut because they were running out of money.
Consequences of a Simple Mistake
This story is based on an actual couple who came into my office to get a second opinion after they had been retired 20 years and all of the major decisions were made.
It was too late for them to find their better way. They now have a problem with their retirement income from their government pension.
Sadly, their financial broker had already failed them.
That’s a terrifying story, I know. You might end up in the same kind of dilemma by the time you reach retirement age.
But it doesn’t have to be this way!
They will enjoy contributions they made to their pension from their hard-earned money by the time they reach regular retirement age.
At a time where fixed-income retirement pensions are almost extinct, IRAs and 401(k)s are at the mercy of investment earnings, and personal savings are at record lows, Social Security will be there for you through good times and bad.
That’s why today it’s time to set the record straight.
Know the advantages and disadvantages of social security to better prepare for your retirement.
Pros and Cons of Social Security
Some Social Security pros include:
- Spouses can claim their husband or wife’s benefits.
- You have the option of claiming your benefits at 62.
- A consistent monthly income for those in need.
- It gives equal freedom to still work after retirement.
Meanwhile, the disadvantages of Social Security tension include:
- It’s not available for people who did not qualify.
- The age to enjoy full benefits is at 70 years old, which may be too old to enjoy the perks of retirement.
- You get a permanent reduction in your retirement pension if you make a claim before the intended time of your retirement.
Before we begin this journey towards helping you get the most out of our country’s greatest retirement benefit, let’s take a look at the leg up Social Security has over other retirement plans first.
Social Security’s Top 3 Advantages You Need to Know
Social Security provides retirees with three very important advantages that your retirement savings and even most pensions cannot give you.
These three advantages will help you with what you plan to do with your retirement accounts.
Advantage #1: Guaranteed Income
You can collect the full amount of Social Security you have earned at what the Social Security Administration calls your full retirement age, which varies based on your birth year.
Workers who choose to begin receiving Social Security benefits before the full retirement age specified will receive reduced payments for the years to come.
Advantage #2: Cost-of-Living-Adjustments
Payments are adjusted for inflation.
Social Security payments get adjusted on a year to year basis to keep up with inflation. They base the rate of inflation on the Consumer Price Index for Urban Wage Earners and Clerical Workers.
So you won’t have to worry about the worth of your benefits decreasing its value as the years go by.
Advantage #3: Lifetime Benefits
Once you file for Social Security, you receive payments regularly for the duration of your life. You can’t outlive your Social Security benefit.
Best of all, Social Security is a benefit guaranteed to nearly every hard-working American citizen.
That’s right… all three of these benefits are at your disposal.
Of course, Social Security isn’t perfect, but it’s much better than most plans. And the first step to unlocking its true potential is simply knowing what its powers are.
Now that we’ve laid down the basic groundwork, let’s dig a little deeper.
What other pros of Social Security do you know? Share your thoughts about your retirement income in the comments section below!