April 17, 2014
Social Security 101
As a young adult starting my career in Chicago in the 1980s, I didn’t have a clue how Social Security worked or why money was being taken out of my scrawny paycheck.
But trust me on this: the Social Security retirement program becomes a lot more interesting to workers as they age and their retirement horizon comes into sharp focus. It affects just about every American – and most of us pay into it.
It is not only the bedrock of retirement for millions of Americans and their spouses, but it’s also a source of income for their survivors, including children, and workers who become disabled.
In this video, officials from the U.S. Social Security Administration explain what its programs do and why they matter. Learn More
September 26, 2013
Social Security Claiming and Psychology
It’s common for people to begin collecting their Social Security benefits soon after they turn 62, ignoring the financial planners and retirement experts urging them to postpone and increase the size of their monthly checks.
A new study has uncovered four powerful psychological traits that influence this decision: the individual’s expected longevity, his fear of loss, whether he perceives the Social Security system as fair, and patience.
The study surveyed some 3,000 people, primarily in their 40s and 50s. This is a good age to ask about Social Security, because claiming the benefit is a few years away, “but they’re thinking more about it,” researcher Suzanne Shu said when presenting the findings at an August meeting of the Retirement Research Consortium in Washington.
In an online survey, Shu, who is from the University California at Los Angeles, and John Payne, from Duke University, posed a series of questions designed to understand the psychology of the individuals they were studying. They also asked when they planned to claim their Social Security and then determined which psychological traits were linked to those who said they planned to file early.
Four influences on claiming came out of their preliminary findings:
Fear of loss. People who have a stronger aversion to financial loss also tended to say they would claim earlier. To them, the researchers said, a delay in receiving their benefit checks “looks like a potential loss.” …Learn More
July 30, 2013
Social Security and Two-Income Couples
The decades-long march of women into the nation’s workplaces may be the most enduring trend in the labor force – and a signature of American progress.
But it is also one more reason that Social Security benefits today replace a smaller share of the lifetime earnings of married couples than they did in the past, when far fewer women worked for pay.
Other reasons include the gradual increase in the age at which U.S. workers can claim their full retirement benefits, from age 65 for the oldest retirees to 67 for Generation X. Medicare premiums are also taking more out of the monthly Social Security check, and more retirees are being taxed on a portion of their benefits over time.
But for married couples, the sharp increase in the ranks of working wives has reduced the share of their joint earnings during their working years that is replaced by Social Security when they retire. For the typical couple born in the Depression, Social Security benefits cover 45 percent of their prior earnings, but that falls to 41 percent for baby boomer couples retiring today, according to new research by the Center for Retirement Research, which supports this blog.
These Social Security “replacement rates” – benefits as a percent of employment earnings – will continue to decline, to just 37 percent for Generation X couples born between 1966 and 1975. …Learn More
June 27, 2013
62YO Men File Social Security; Wives Pay
My father was never more in love with my mother than on the day he died in 2004, days before their 50th anniversary.
But he made one bad financial decision that she lives with today: he started up his Social Security benefits at age 62.
He felt he needed the money sooner than later. He had an inadequate pension from his first career, as an Air Force flyboy, and none from his Rust Belt business that went bust. But waiting to claim his Social Security would’ve increased the size of his check – and, after he died at 70, the money that’s still deposited into my mother’s bank account every month.
This happens to a significant share of couples, because almost 40 percent of all Americans claim their benefits the same year they turn 62. But a husband who waits until age 65 can increase his widowed wife’s future benefits by up to $170 a month, according to new research by Alice Henriques, an economist with the Federal Reserve Board in Washington.
What’s interesting about this study of nearly 14,000 older couples is that she teased out how much the husband’s decision was determined by the filing date’s impact on his own benefits, versus the financial impact on his wife’s spousal and, later, her survivor benefits. Similar research in the past had examined the impact of a filing date on their combined benefits during all their years of retirement.
Henriques was able to show that the husbands, when they made their decisions, took into account the impact on themselves of the claiming date they selected. But they showed virtually “no response to the large incentives” of having the ability to provide their widowed wives with more income in the future, she said. …Learn More
April 4, 2013
Webinar to Explain Social Security
In a webinar next Thursday, an official from the Social Security Administration will explain the fundamentals of calculating and claiming benefits.
Social Security represents the largest single financial resource for most baby boomers, so deciding when to file for benefits is their single biggest retirement decision.
The value today of that future stream of monthly checks – $287,200 for the typical household aged
55-64 – far exceeds the value of home equity or 401(k)s for most people, according to 2010 data from the Federal Reserve Board. And it often exceeds the value of their traditional defined benefit pension plan – if they even have one. The lower one’s income, the more Social Security matters too.
The webinar was organized by the National Retirement Planning Coalition for financial planners, who are not always familiar with all the rules for the program. But anyone can participate, according to the coalition leader, the Insured Retirement Institute. (Full disclosure: the Center for Retirement Research, which hosts this blog, is a coalition member). Space is limited and going fast for the webinar, which will also be available online a few days after the webinar on this website.
To register for the April 11 webinar, click here.
The following topics, among others, will be covered in the webinar, including: … Learn More
February 7, 2013
Why Minorities Need Social Security More
Source: Social Security Administration
The U.S. population is in the midst of a transition from predominantly white to one in which “minorities” will one day be the majority.
A Social Security Fact Sheet recently published by the Center on Budget and Policy Priorities in Washington throws a fresh perspective on the program, which provides the financial bedrock for most retirees. It shows that the program is even more important to African-Americans and Latinos than it is for white Americans.
Seventy-three years after Ida May Fuller became the first person to receive a Social Security check, on Jan. 31, 1940, Social Security provides more than half of the retirement income received by about two out of three elderly white Americans. But many more – about three out of four – African-American and Latino retirees rely on Social Security for more than half their income.
The obvious reason is that minorities earn lower incomes on average while they are working, according to Kathy Ruffing, a senior fellow at the Center, and that has “hampered their ability to save for retirement.”
Congress intended Social Security to be a progressive program that benefits lower-income individuals more. The Social Security Administration’s (SSA) formula for calculating the monthly check is designed to replace a larger share of the employment income of, say, a maintenance worker who has retired than it does for a retired corporate executive. …Learn More
September 20, 2012
Social Security: There is a Better Way
Married couples have up to 567 options for deciding when and how to file for their Social Security benefits. Yes, 567!
“They are faced with a bewildering array” of choices, said David Freitag, vice president of Impact Technologies Group Inc. in Charlotte, North Carolina, which just released a spiffy, user-friendly Social Security calculator to help.
No wonder people just throw up their hands and claim their benefits at 62, when they first become eligible. But in the midst of the baby boomer retirement tsunami, oodles of calculators are coming online to simplify the decision for couples. Impact is offering a 14-day free trial to anyone who wants to test its calculator.
Couples’ strategies have become more complex, because today’s boomer wives have spent a lifetime working and because they may earn wages rivaling or exceeding their husband’s, said Jim Blankenship, a financial planner in New Berlin in central Illinois. There is also more money at stake in making the right decision, he said.
“Before, it was much easier to have a rule of thumb to go by,” he said. “The decisions are different than what they used to be.” …Learn More