Are You Secure with Social Security?

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It's Never too Early to Start Planning for a Comfortable Retirement
by Minya K. Irby | Living Well | Wednesday, June 19, 2013

"The question isn't at what age I want to retire, it's at what income.”  
~George Foreman

The bottom line is whether you are age 25 or older- the time to start planning for your retirement is now. Think about it…It may seem like you were just graduating from high school or college just a short while ago— but if you think again, you’ll realize that time really does fly, as those days are long gone. 

According to a recent Gallup Poll, fewer Americans are optimistic about the future status of their personal finances today than they were last year. And although many African-Americans remain optimistic about their financial futures and continue to progress financially, the numerous financial obligations faced by those with lower incomes can get in the way of the need to invest or save adequate funds for the future. But, despite any differences in socio-economic status, I believe the one thing in which we can all agree is that everyone has a need for retirement income.  


Relying On Social Security

While Social Security is expected to be a part of your retirement income, the issue is that for many, it will be the only source of retirement income. Because of this, it’s important to think more seriously about the income you would like to have when you retire, although age is still a factor. For example, many people understand that full retirement is no longer at age 65.  In fact, for most Baby Boomers, full retirement is at age 66.  For individuals born after 1960, it is age 67. You are eligible to claim benefits anytime between the ages of 62 and 70. Although claiming benefits at age 62 may seem ideal, (especially if you have taken an early retirement and are beginning to feel pulled into the retirement income gap) taking your retirement at age 62 may not help you, but may in fact hurt you because claiming benefits early will reduce the amount of benefits that you’ll receive for the rest of your life. 

So, what can you do now in order to plan for a comfortable retirement, especially if you anticipate that social security will be your main source of retirement income? Well first, you’ll need to consider Social Security Timing. 

Your Social Security Timing Strategy  

Social Security Timing is a simple strategy you’ll want to consider to help you plan-- not one year prior to retirement, but at least
7-10 years prior to retirement. The strategy involves looking at different estimates of your benefits at different age levels prior to and after full retirement age. This encourages you to think about what you presently have saved, invested, and how much longer you’ll need to work to continue to live comfortably for the rest of your life. 

Have a Team of Qualified Advisors 

Second, I recommend that you begin to build a Social Security Strategy “Team” that includes you, your spouse (if married), a financial advisor, and your tax advisor. Yes, I said your tax advisor. Having a tax advisor is critical to your team because he or she will understand that the biggest killer to any retirement income is taxes. If anyone ever told you that your Social Security could not be taxed after a certain age, they have misinformed you. In our accounting office this past tax season, I reviewed multiple tax returns where the Social Security benefit was subject to taxation; and in at least a dozen returns, 85% of that benefit was taxable. Based on income, the IRS has the right to tax up to 85% of your benefit. It may not sound fair, but it is the law. 

Know Your Entitlements  

Finally, knowing what you are entitled to receive, or what your spouse is entitled to receive in the event of your death, or even what your minor children are entitled to receive from the time you reach age 62 to full retirement, should also be a part of your retirement planning strategy. 

Remember, the goal in retirement is to maximize the amount of money that you have in order to make it last for the rest of your natural life. This starts with thinking about the level of financial security you desire to have in the future, developing a solid Social Security Timing Strategy and building a skilled Social Security Strategy Team…and if retirement for you is only ten years away, the time to start planning is now.   

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