Retirement is a journey. Getting where you want to go requires a plan.
I get a number of questions with regards to social security, and there are two today that I want to share with you: one is the new full retirement age number for the year of 2022. And the other, which is a very important question for baby boomers, is “will Social Security be there for me?” I have over 30 years experience in this business and I want to share with you my conversations with my clients so that you can learn from them.
I ask all of my clients or prospects this question: “how many social security strategies are actually available to you?” And the answer I typically get is somewhere between six and 10. But the reality is there are 567 different claiming strategies. No wonder people are confused, concerned, a little fearful of not actually maximizing their social security income! This is backed up by a study that was done a couple of years ago from United income that indicated that 96% of people take Social Security at the wrong time. It also indicated that most people are better off waiting until age 72 to claim. The big takeaway from the study was that by claiming at the right time, more than half of retirees would see their income in their 70s and 80s rise by more than 25%.
The New Full Retirement Age for 2022
I want to empower you with as much information as possible so you’re not leaving money on the table in retirement. First, let’s address the issue of the new full retirement age for 2022. From 1935 to 1983, the full retirement age was 65 for everyone. And then in 1983, there was some legislation that changed some of the social security rules. They indicated that they were going to increase full retirement age from 65, to age 67, but it took around 22 years for this to be enforced and implemented. So what we’ve all been working off of until this year, is:
If your year of birth was 1943, through 1954, your full retirement age is 66. If you were born in 1960 or later it is 67.
And anything in between it was prorated, for example I was born in 1955. So I’m 66 and two months.
This method has caused a lot of confusion, and starting in 2022 it’s been simplified. There’s only one full retirement age now: 67. Period, end of conversation.
Will Social Security be there for me?
So I want to go into the big question I get asked, which is will Social Security be there for me? The Old Age Survivor Disability Insurance Trust Fund (OASDI – can we change that name? I don’t feel that old yet), believe it or not, is still growing. Now the trust fund balance on December 31 2019, as you can see was 2.897 trillion. And based on the incomes and outflows 12 months later, at the end of 2020, it was 2.908 trillion. But without any reform at all, one can assume that in 2034, the benefits will decrease to only 78% of the guaranteed amount. So in other words, they will be able to pay out 78 cents on the dollar.
Now, that does not mean that they’re going bankrupt. That means if there is no reform, then they will be paying us a little bit less than what we have been getting. So the question is, what needs to happen in order to avoid that? There are a number of different options here to help to remedy the situation.
- Increase maximum earnings subject to the Social Security tax, currently, it’s 147,000.
- Raise the normal retirement age. With the actual actuarial tables and life expectancy going up that seems like something that should be pursued
- Lower benefits for future retirees
- Reduce the COLA, which is assumed at this point (April 2022) by the trustees to be approximately 2.6%.
I hope this helped you understand a couple of the major questions that are out there so you can make the best decision.