Social Security is Found Money

OK, I felt pretty OLD shuffling into a free seminar on Social Security benefits.  Hot Rod twisted my arm to attend.  “We should know what we are entitled to,” he nudged.

“If we get anything, it will be the cherry on top,” I insisted.  Long ago I gave up on any hope that Social Security would be of any benefit to me.  Interestingly, when we visited with our financial planner a few months ago, he backed me up.  “Focus on contributions to your retirement plans.  Social Security may be a nice bump, but don’t count on it.”

So, I joined Hot Rod for the seminar, more to be a supportive spouse than to participate.

I was way wrong.  I learned that Social Security doesn’t stink.  And, if you plan well, guess accurately and die at the right time, Social Security can be a multi-million payout.  In any event, there is a benefit there.  You can capitalize on it or blow it.

Here are a few notes I jotted down in class…

  • If you are over 50, and a betting man or woman, I would bet that Social Security will be available to you in some way shape or form.  You paid into it.  It’s there.  Granted, it may not be there for our kids.  However, you might as well take responsibility for your benefits.  If some major – and I believe unlikely – change in government dissolves the program, it probably won’t disappear all at once.  25% of all families in the US receive some sort of Social Security benefit every month.
  • At Full Retirement Age (FRA), you can collect maximum benefits and continue to earn income without penalty or additional tax burden.  If you are born before 1960, that would be no older than 67 years old.  Check out the Social Security website for your FRA.  You may be eligible for partial benefits now.  Note that there’s a lot of information online, but there are so many ways to piece the puzzle together.  And, getting help from your local Social Security Administration makes a trip to the DMV look like a Disneyland vacation by comparison.  Just sayin.  It may be a good idea to wait to cash in benefits.  But there is more to the story.
  • Your PIA is your Primary Insurance Amount, or monthly benefit.  The goal of a sound Social Security benefit strategy is to maximize your PIA.  Factors that impact your PIA include your age, how long you and your spouse live, you and your spouse’s age and income, your expenses,  all impact your PIA. Your current portfolio, income, income tax levels, intention to keep working or stop earning, and even health risks play into the equation.  If you have a terminal illness, you are going to adopt a different strategy than someone who is healthy, thin, and has never smoked.  There are over 500 ways to calculate your benefit plan.  
  • Note that one of the reasons that marriage equality is so important is that only marriages between a man and a woman qualify for spouse benefits in many states.  Divorced people may be eligible for additional benefits, if they were married for more than 10 years.  Knowledge is power.  It’s helpful to proactively explore your options before age or a health issue creates a financial crisis.
  • As a business owner, pay yourself.  Pay yourself well.  If your company is a Sub S Corporation, you are required to pay yourself a salary.  You can also take draws.  But here’s the thing:  You have to pay in to get a substantial pay out, as your pay – subject to payroll tax deductions – determines your PIA.
  • Social Security payments, once energized, are not subject to fluctuations in the market.  If you, like me and lots of others, lost a chunk of assets