Social Security benefits make up 33% of total retirement income for Americans over 65
What's the Deal?
Social Security is an amazing benefit many of your clients have earned over a lifetime of work. The program offers a variety of options for retirees, with plans they can tailor to best meet their personal needs. As your clients approach retirement, let them know they are not alone. Beginning with the first of the Baby Boomers who turned 65 in 2010, more than 76 million Americans will transition into retirement by 2030.
Transamerica’s Field Guide to Social Security, helps answer some of the most common questions about Social Security benefits, making it a great resource for you and your clients as they prepare for retirement.
*Insured Retirement Institute, “Boomer Expectations for Retirement in 2017,” 2017.
Income Sources of Current Retirees
Married Clients? Here’s What They Need to Know About Social Security
When it comes to Social Security benefits in particular, marital status can play a big role, and it’s something for them to consider as they prepare for retirement.
Terms to Know
Cost-of-Living Adjustment (COLA):
Each year, the Social Security Administration adjusts monthly benefits to ensure that the purchasing power of benefits is not eroded by inflation. The COLA is based on the increase in the Consumer Price Index.
Delayed Retirement Credits (DRC):
Individual Social Security benefits are increased by a percentage (depending on birth date) if you delay retirement beyond your Full Retirement Age. The benefit increase stops at age 70, even if you continue to delay claiming.
This is the payroll tax used to fund Social Security. It is collected by authority of the Federal Insurance Contributions Act (FICA).
Full Retirement Age (FRA):
This is the age at which a person becomes entitled to unreduced (full) Social Security benefits. The age is determined by date of birth, currently increasing gradually to age 67 for those born after 1959.
Primary Insurance Amount (PIA):
This is the benefit amount a worker would receive if he or she elects receiving Social Security benefits at Full Retirement Age (FRA). Retire before FRA and the PIA is reduced, delay retirement and the PIA increases.
Windfall Elimination Provision (WEP):
Some federal employees and employees of state or local government agencies may be eligible for pensions that are based on earnings not covered by Social Security. The Windfall Elimination Provision (WEP) may affect how Social Security calculate your retirement benefits. If you work for an employer that does not withhold Social Security taxes, any pension you receive may reduce your benefits.
So What...Here's Why It Matters
A financially secure retirement doesn’t just happen. It takes foresight, years of planning, and preparation.
Understanding how Social Security works, what it provides – and what it doesn’t – is a big part of planning for retirement.
With a thorough understanding of Social Security, those planning for retirement can make better decisions, and prepare to fill potential income gaps while there’s time.
Social Security Tools Even the Young Can Use
Even before retirement, there are Social Security tools your clients can use.
Social Security: At Every Age
The retirement your clients imagine is within reach.
Getting an early start and following a plan can help your clients prepare for a secure retirement. With solid planning and disciplined choices, your clients can aim to achieve a retirement they've hoped for.
Click each age range below to explore how Social Security can be an important part of retirement planning at every age.
Thinking about Social Security now provides options later. Your clients are working hard, earning benefits that will reward them in the future. Help them imagine their retirement and living securely in a future that they can start shaping today.
Sit down with your clients and help develop a retirement strategy. How much income will they want? How much income will Social Security alone provide? You can calculate their anticipated Social Security benefits at SSA.gov/myaccount.
Deciding when to claim benefits is the most common question clients ask. That’s because it’s one of the most important financial decisions they’ll make as they build their retirement plan. As clients get closer, make sure to talk with them and their spouses, about their individual circumstances.
Do your clients want to continue working? Will they be able to, due to health or other considerations? Have they saved enough to realistically meet their goals? Don’t let retirement sneak up on them, take charge and help them make the informed decision.
Your clients can file for benefits as early as age 62. That will start their monthly benefits at the earliest possible date, but it will cost them. By filing before Full Retirement Age, their monthly benefits can be reduced as much as 30% – for life.
Waiting a year or two can substantially increase their monthly benefits. Even delaying a month can make a difference.
Starting at 65, another government benefit kicks in, whether your clients are still working or not: Medicare, the government health insurance program. Make sure they understand your benefits. And if they haven’t filed for Social Security benefits, they won’t be automatically enrolled, they’ll have to do it themselves. If they miss the date to sign up, they could end up with coverage gaps and a costly lifetime penalty. Find out more at Medicare.gov.
And when your clients reach their Full Retirement Age (67 for those born after 1959, a little sooner for those born earlier) they can claim the full monthly benefit they are entitled to. But if they really love their work (and who doesn’t), clients can delay filing, watching their monthly benefit increase at about 8% a year until they reach 70.