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Social Security Benefits and Retirement Planning

You’ve probably daydreamed about retirement for years. Maybe the vision of your perfect retirement is the only thing that keeps you going when your alarm beeps too early on a cold Monday morning, or during yet another endless meeting. But will you be able to afford that perfect retirement? This is the question that plagues many of my clients. If you’re like most Americans, you’re counting on Social Security benefits to replace at least some of your income in retirement.

Gallup polls Americans on their feelings about Social Security every year. In 2020, 36 percent of respondents said they expected Social Security benefits to be a major source of income in retirement. (That’s a notable increase from just two years earlier, when only 30 percent of respondents gave this answer.) A further 52 percent said Social Security benefits would be a minor income source, and just 12 percent said that Social Security wouldn’t be an income source in retirement.

If you’re in the majority, and your plans for a comfortable retirement depend at least in part on Social Security benefits, it’s important to understand how the future of the system is likely to affect your plans.

The Future of Social Security Benefits

Many Americans are concerned about the future of their Social Security benefits. (In Gallup’s 2019 polling, 41 percent of respondents said they worry “a great deal” about the system.) For years, the Social Security Administration has been projecting that its financial reserves will run out by 2035, due to the proportion of retirees drawing benefits to the number of workers contributing to the system. Once the fund is depleted, only the Social Security taxes that are paid each year will account for the benefits that are paid out. At that point, the SSA projects that it will only take in enough to pay for 75 percent of scheduled benefits. (Future changes made to the Social Security system between now and 2035 could also affect benefits.)

For several generations, Social Security recipients have been able to rely on those benefits to cover many basic expenses. However, according to the SSA projections, today’s young adults can’t count on Social Security being available to them. That said, if you’re 55 or older right now, your full Social Security benefits should be available to you when you’re ready.

Timing Your Social Security Benefits

Deciding when to take their Social Security benefits is a question many Americans face, including those who have solid retirement plans. There are many factors to consider when deciding when to take social security, making “right time” a little different for everyone.

It’s normal to debate a number of what-if questions when you’re thinking through your options. What if you start getting Social Security benefits at 65, then live to 100—how much money will you miss out on by not waiting until 70? On the other hand, what if you decide to keep working and delay payments until you’re 70, then die at 69 and miss out on a real retirement experience? How will any current health issues affect your estimated lifespan?

If you and your spouse are both due to get Social Security benefits, your ages and your joint finances are factors too. Will one of you start receiving benefits earlier than the other? Can you agree on a timeline that works for both of you?

All that said, it’s generally advisable that healthy adults approaching retirement hold off as long as possible on taking their Social Security benefits. Waiting until age 70 maximizes your benefits, putting you in the best possible position for a long and financially secure retirement. If you have a surviving spouse, delaying Social Security benefits until 70 also maximizes their income after you’re gone. Whether this is advisable in your case depends on your circumstances, so timing your Social Security benefits is a discussion to have with your financial advisor.

Social Security Benefits as Part of Your Retirement Plans

For Americans 55 and up, we know that the Social Security system is secure for the near future, and that your earned benefits should be waiting for you when you’re ready to start claiming them. So despite some general uncertainty around the future of Social Security, it’s safe to count on these benefits as a central part of your retirement plans.

But Social Security benefits are just one element of a balanced and comprehensive retirement plan. Many of your future costs are unpredictable. Knowing that you’ll always have enough to cover your personal and medical needs requires a solid financial plan and a number of income sources. This is especially critical for workers who are younger than 55 and can’t count on full benefits.

Are you clear on how your Social Security benefits will function as a part of your retirement plan? Whether your retirement is in the near future or still decades away, I urge you to discuss this with your financial advisor now. Contact me today.


Eric Sachetta has been advising clients for life’s road ahead at Sachetta since he joined the team in 2016. Due to his dedication to the firm and to our clients, Eric committed to the firm by becoming a shareholder in 2019.