Social Security and retirement go together like peanut butter and jelly — many people just can’t have one without the other.
Yet when it comes to Social Security, there is a mountain of anxiety about how it factors into retirement plans, especially for the millions of people who depend on it as their only source of income.
Politically, Social Security is often vilified as an entitlement program that costs taxpayers too much. And there’s concern that it’s in danger of running out of money.
Let’s take a look at that last point. Social Security does have some big funding issues, according to the just-released annual trustees report. Over the program’s 82-year history, Social Security has collected about $20.9 trillion and paid out $18 trillion. But the reserves for the Old-Age and Survivors Insurance Trust Fund, which pays retirement and survivor benefits, will be unable to pay full benefits in 2034, according to the report. The Disability Insurance Trust Fund, which pays disability benefits, will no longer be able to pay full benefits in 2032.
“Social Security’s total cost is projected to exceed its total income [including interest] in 2018 for the first time since 1982,” the report said.
But even with this dire warning, the program would still have enough continuing tax income to pay out 77 percent of scheduled benefits for the Old-Age and Survivors Insurance Trust Fund in 2034. And there will be enough coming in to cover 96 percent of scheduled benefits for the Disability Trust Fund when its reserves are depleted in 2032.
So, despite its funding issues, the Social Security program isn’t going anywhere, and that means you need to know how best to collect your benefits. To help you navigate this complicated and often confusing program, I’m recommending for this month’s Color of Money Book Club “Social Security: The Inside Story” by Andy Landis (CreateSpace, $19.95). Be sure to get the silver-anniversary edition.
Landis is a guru of all things Social Security. He spent 12 years working for the agency, and then he put his insider knowledge to work for himself by helping individuals and professionals understand the labyrinthine program.
“Many people believe that Social Security is merely a retirement program,” Landis writes. “But Social Security has always been much more than that. Today it is a comprehensive program of worker benefits, covering not only the worker but also family members.”
Each chapter starts with a nutshell summary, which is a useful guide if you want to skip around to topics that interest you the most. I jumped straight to the section on “The Delay Strategy.”
My husband and I have been talking a lot about when to start collecting our benefits. He wants to start at 62, even though he’s fully aware his benefits will be reduced. He argues we can use the money to travel while we’re still healthy. I’ve been arguing to delay to 70. We both reach full retirement age at 67. (I wrote in January about our debate over whether to take it early or wait.)
“Quite simply, the later you apply for retirement payments, up to age 70, the higher they’ll be for the rest of your life,” Landis writes. “You’ll get a higher total payout if you live at least to the average life expectancy. And the higher payments might continue even longer, for your spouse after you pass away. It’s a gift that keeps on giving, for two lifetimes.”
Of course, when you start collecting is an individual decision, and no set course of action applies to everyone.
It’s not until chapter 11 that Landis fully addresses the solvency of Social Security. He answers the question I get all the time from young adults. “Will Social Security be bankrupt before I retire?” He says the answer is no.
“Social Security’s solvency is a remarkable accomplishment in this era of troubled banks, large insurance companies in receivership, and pension plans in bankruptcy,” he says. “Social Security is one of the soundest financial systems in the nation and the world. Americans can take pride in this achievement.”
Landis also reminds readers that this program is insurance, not an investment. He makes this point in a discussion about fixes to financially shore up the program.
Despite the denseness of the topic, this book is a very easy read. And it’s not just for folks nearing retirement. You need this knowledge long before you’re ready to collect benefits. The more you know, the better you can plan.
I’m hosting an online discussion about “Social Security: The Inside Story” at noon Eastern time on June 28 at http://washingtonpost.com/discussions. Landis, who retired this year at 66, has agreed to join me to take your questions.