By: Ronald Reinstein MBA, CDFA, CSSCS 
Senior Wealth Manager 
The Financial Guys 

Before you enter the retirement phase of your life, you must ask yourself some hard questions.  Have you saved up enough money to meet your retirement income needs on a inflation adjusted basis? Is your retirement income plan only designed to produce a level income for 30 years?  If so, inflation is going to erode your purchasing power.  The cost of goods and services that you need will increase, while the purchasing power of your dollar is going in the other direction. 

You may not have the answers to these questions today, but you if you are considering retirement. If financial mistakes are made in retirement, the consequences will not likely appear right away. As the years pass, the mistakes will become more apparent and very unlikely correctable. Building a retirement income plan that has the optimal weighting in Social Security income will help you hedge against inflation, taxes, and your longevity. In addition, the optimal Social Security income may reduce the market pressures on your investable assets due to the guaranteed income that Social Security will deliver. 

This is why I am an advocate of having Social Security be the cornerstone income piece in your retirement. 

Now, why would I be an advocate of building a plan that has Social Security as a cornerstone piece of your retirement income? Am I making a prudent planning recommendation? The naysayers out there claim that the Social Security trust fund will run out of money should changes not be made. Our statements we receive from the Social Security Administration even tells us this! Should changes not be made, Social Security will run out of money. Changes have been made already to address this. And yes, more need to be made. 

The Social Security Administration every year raises the amount of taxable earnings (W2, Self-Employment 1099 Income) that will count for your Social Security benefit. In 2019 the maximum taxable earnings were $132,900. In 2020, the amount was raised to $137,700. Should you earn above $137,700 in 2020 any wages above $137,700 will not count towards your Social Security benefit. Also, our Full Retirement Age (FRA) has been pushed out due to life expectancy increasing. Full Retirement Age is the age in which we will not receive a permanent reduction once we elect to take our Social Security benefit. Should someone who is entitled (meaning they have 10 years of a work record and or 40 credits with Social Security) to take Social Security today and they are 62 years old, they will have a permanent 25% reduction to their benefit. The only way their benefit will increase is with Cost of Living adjustments (COLA). 

We are witnessing the devastation of the economy (not the stock market) from the effects of Covid-19. In states such as New York, people still cannot get through to file a claim for unemployment. There are those that have been able to file their claim for unemployment and it took months to receive a check. We have seen on the news, images of hundreds of people sitting in their cars waiting to get into a food bank to feed their family. The economic destruction is real. Let take these occurrences and now apply them to the millions of Americans that are recipients of Social Security. All of the naysayers and the government were correct, and their worries and projections were not unfounded. Social Security ran out of money, and therefore no monthly checks will be deposited into recipient’s accounts going forward. 

Now, lets look at this from the real-world perspective. Here is why I believe Social Security will not run out of money. IRS data from 2017 shows that 12% of Americans age 65 and above, 90% of their household income was from Social Security (https://www.census.gov/content/dam/Census/library/working-papers/2017/demo/SEHSD-WP2017-39.pdf). The number of Americans collecting Social Security that calendar year was 61 million (https://www.nasi.org/learn/socialsecurity/who-gets).

From the data that means 7,320,000 Americans age 65 and older rely on their monthly Social Security benefit to produce the majority of their income to hopefully meet their expenses. To add into the discussion here, 8,755,405 people were receiving Social Security Disability in 2017(https://www.nasi.org/learn/socialsecurity/who-gets). In some instances, Social Security Disability may represent the lion share of household income on a monthly basis. If 16 million Americans are not getting a check from Social Security, what would you think the result would be for these individuals and the economy? It would be catastrophic!

I am encouraging people to move past the fear regarding Social Security and your Social Security benefit. This is why I hold the Certified in Social Security Claiming Strategies (CSSCS) designation.  I will teach you and help you discover how a plan properly weighted in Social Security income in your retirement will provide you the following: 

• Income that is inflation adjusted.

• Income that is tax efficient.

• Income that is backed by a government promise.

• Income that is paid for your lifetime.

• Should you be married the highest Social Security benefit will stay in the household should one spouse pass away.

Does your pension and or retirement savings do all the above as well?