Monthly Archives: December 2015

The Implications of Social Security Decisions

There are few investments that guarantee a good annual growth. One that does is the Social Security System where deferring benefits from the youngest age they can be taken, 62, to the latest, 70, ensures monthly benefits are much higher. There is therefore a strong case for that deferment where possible. People who have made little in the way of providing for retirement may be desperate and forced into claiming. What are the facts?

Look at the Figures

The official retirement age for those born from 1960 onwards is 67, although benefits are available at 62. If you need to draw at 62, your benefits will reduce by 30%. If you can delay until 70, the increase is 30%. Quite an increase and surely a compelling reason for deferment?

One argument of taking benefits at 62 is that recipients get 12 checks extra per year for each year until someone deferring actually starts to receive anything. Something else to consider however is once someone starts to claim, that sets the amount any dependents will subsequently receive on the death of that person.

Life Expectancy

Life expectancy is a major factor to consider. People in good health are increasingly living past 80 and beyond. Potentially many can expect to be drawing benefits for 20 years. Likewise dependents will perhaps need benefits for a longer period than in the past.

It is a matter of personal choice whether you believe that the total amount you will receive as an individual will amount to about the same whether you take the smaller sum early but benefit for those extra years. In the end no one can predict how long they will live and whether the extra 96 checks at the lower rate, and future ones at that rate will total the amount of the increased monthly amount multiplied by an indeterminate number of years.

There may be a case if parents and grandparents lived a long and healthy life then you can reasonably expect to do likewise. That being the case, do your calculations and decide based on what the figures show. Those who expect to reach 80 will probably receive more by deferring.

Will Money be Tight?

A long life is great as long as you are relatively healthy. The problem comes when money becomes tighter. The figures of average retirement funds held by individuals are surprising low, and frankly disappointing. The average fund of those within 10 years of retirement is less than $80,000. That represents only about $3,000 per year to add to the Social Security payment. That is rarely enough to live on, and certainly not comfortably.

There are several adjustments to be made in retirement and many are no-financial. Social interaction is perhaps an umbrella description of some because the work environment no longer exists; routine has to change. It is an argument for delaying retirement as long as you enjoy your job and are healthy enough to do it. If you do your benefits can be deferred anyway.

Create the Right Environment

Retirement is a reality; a bit like death and taxes! What does not have to be a reality is a struggle in retirement. Statistics on saving, retirement provision and on the other side the level of domestic debt in society are quite disturbing. Whatever your age you should spend some time thinking about your personal financial situation. If you have significant debt then you need to devise a way to pay it off. Mortgages are generally excluded from this because they should be working positively for you. They most certainly include debts on credit cards because balances incur a high level of interest each month.

realistic loans are cheaper and can actually be categorized as positive debt if they are used to pay off credit card problems. You will be taking positive action which will actually save you money.

Only when you are in control of your finances will you be able to make positive moves to save for the future in whatever form you decide. Whatever the subjective decision on when to take benefits in the future, wouldn’t it be great to be able to decide without the factor of desperation coming into it? It can be done as long as you remain employed with a regular income.