The Social Security Administration May Be Steering You Wrong
Cost-cutting can be great, but it can also lead to undesired consequences. Consider, for example, the Social Security Administration (SSA), which has undergone multiple years of budget cuts and faces further cuts. While the major agency continues to serve tens of millions of retired and disabled Americans and many survivors, its recent performance leaves room for improvement.
Specifically, a study by the Government Accountability Office (GAO) found that many retirees are not being given some critical information that would help them get the most out of the program.
Social Security in a nutshell
Social Security pays close to 62 million Americans, with benefits totaling $955 billion in 2017. About 42 million recipients are retirees collecting retirement benefits. Others are dependents of those retirees, disabled workers and their dependents, and survivors, including children.
Not only is Social Security a massive program, it also is a critical one for most Americans. The program was designed to replace about 40% of pre-retirement income for those who earn an average income. But the reality today is that a majority of elderly beneficiaries get 50% or more of their income from Social Security, while 23% of married ones and 43% of unmarried ones get fully 90% or more of their income from it, according to the SSA.
Just how much are they getting? Well, what you get out of Social Security largely depends on what you paid into it. Remember that workers get 6.2% of their wages withheld as a Social Security tax, with their employers coughing up a corresponding 6.2%, for a total 12.4% tax on earnings. (The self-employed have to pay both the employer and employee portions, forking over the entire 12.4% on their own.)
The average monthly retirement benefit was recently $1,375, which totals $16,500 per year. If your earnings have been above average, though, you'll collect more than that -- up to the maximum monthly Social Security benefit for those retiring at their full retirement age, which was recently $2,639. (That's about $32,000 for the whole year.)
What's the problem?
Budget cuts to Social Security have led the SSA to trim its workforce, close more than 60 field offices, and reduce the hours that representatives are available to help the public. This has resulted in longer waits in person, on the phone, or online, when people seek help or information.
The SSA has tried to offset the reductions by beefing up its online presence and offering more services online. Given the fact that Social Security benefits are so important to most retirees, and that many people don't fully understand their options, it's vital that the SSA give people the information they need to make the best decisions for themselves.
But a 2016 GAO report found that when retirees and pre-retirees consult the SSA, they're often not given some key information that could help them get more out of the program. For example, "... in 8 of 26 claims interviews in which the claimant could have received higher benefits by delaying a claim, the claims specialist did not discuss the advantages and disadvantages of delay." That's a problem.
While most retirees would do well to start collecting benefits at their full retirement age or even at age 62, some might be best served by delaying collecting up to age 70, in order to get bigger checks. Starting to collect early is often smart, though, as you'll get many more checks, despite their being smaller. If you expect to live a longer-than-average life, however, and you can afford to delay starting to collect, that can be the wise choice.
Many people seeking information or guidance from the SSA are also not briefed on basics of how their benefits are calculated. For example, benefits are based on earnings in the 35 years in which a worker earned the most. If you only work 31 years, four years of zero earnings will be entered into the formula, lowering your benefits.
What to do
The situation isn't good, but there are some smart things you can do to deal with it. For starters, learn more about how to maximize your Social Security benefits on your own. Don't be afraid to consult the Social Security Administration, too. Some advise that it's best to go in person to get more information, and that if the front-line person you meet with doesn't seem to be serving you sufficiently well, ask to see a "Tier 2" representative, who will be even more informed.
You might also keep abreast of plans in Washington to change Social Security, whether it's Congress looking to shrink its budget further to reduce benefits, or to strengthen the program and possibly increase benefits. Contact your representatives to let them know what you'd like them to do regarding Social Security.
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