It might not come as a surprise, but Americans' knowledge of the intricacies of Social Security and Medicare is lacking. So one way to make sure that you maximize your benefits is to learn as much as possible in advance about the ins and outs of what could represent a big portion of your retirement plan.
"Individuals should be aware of what happens to their Social Security benefits so they can plan around them by increasing their savings or adjusting their retirement age," said Copeland. "Any changes that may be made to Social Security will have some effect on future workers' retirement finances. Accordingly, workers must adjust to any changes, which are fairly limited to saving more or working longer."
Greenwald said most people do not maximize their benefits because they are not tactical about when to claim benefits, especially those strategies a husband and wife can use. "In some cases, for example, a lower-paying wife should claim as early as possible and a husband as late as possible," Greenwald said. "The key is to do a careful analysis. Most people do not do that, and they should."
Getting a handle on the strategies that a husband and wife should use is critical, according to Rappaport. "My best advice to people is: Be sure to evaluate claiming alternatives and consider spouse benefits when they do. Many people will benefit from claiming later, and too many claim early."
For her part, Altman said that workers who are insured under Social Security have discretion concerning when to claim their retirement benefits. "The decision regarding the age to first claim benefits, which is an actuarially neutral decision from Social Security's perspective, turns on personal circumstances," she said.
If you're unsure of your expected benefit, get an estimate from the Social Security Administration website (you can find the agency's benefits calculators here.) Also read the National Academy of Social Insurance report "When to Take Social Security: Questions to Consider."
Save early, save often
Social Security is supposed to provide a basic floor under retirees' incomes, but it is only one source of retirement income, the others being workplace pensions and other private savings, said Toder.
"Middle- and upper-income workers have always needed to supplement Social Security with resources from other sources to maintain their living standards in retirement," said Toder. "Given the decline in the number of workers covered by defined-benefit plans and the likelihood that federal budgetary conditions and rising medical costs will compel future retirees to bear a higher share of their health costs than they do today, it is more important than ever to start to save for retirement early."
For his part, Smetters said people need to increase their savings. "People still need to save more, especially as Medicare is also in trouble," he said. "Families who are only saving in their employer-based plans are probably not saving enough."
Others agree with that advice. "The (trustees) reports are another reminder that we all need to save more, save often, essentially save until it hurts," said Michael Wilson, CEO of the International Foundation of Employee Benefit Plans. "Social Security was not intended to provide an individual's complete retirement income."
Don't rely on housing wealth
In addition, Smetters said, Americans should avoid depending too much on accumulated housing wealth. "Despite the obvious risk of fluctuating housing prices, people often decide later not to downsize as they previously planned," he said.
Current beneficiaries go back to work or keep on working
Current beneficiaries, unfortunately, cannot do much to change their benefit, said Copeland. They do have one option, though. "They could go back to work or continue work, and any earnings penalty against their benefits will lead to their benefits being actuarially adjusted upward to account for the penalty," he said. "It is somewhat of a forced savings method."
If you do go back to work while collecting, don't exaggerate the impact of the "earnings tax" on Social Security benefits, said Smetters. "For most households, the additional credit to Social Security benefits from delaying the collection of benefits fully offsets the tax, he said.
Medicare is the bigger problem
The real problem is Medicare, said Salisbury and others. "Medicare now pays an average of half, with new income-based premiums," Salisbury said. "Assume it drops over time to pay 25% and that premiums continue to rise. Plus, health costs continue at a high rate. At retirement at 65 or older, assume you need $300,000 set aside for retiree medical and $300,000 for long-term care if you do not buy a long-term-care insurance policy. This is individual, not couple. Then customize this to your family history and the like. Better to have oversaved and underconsumed than the opposite."
"The bottom line is that households need to start viewing Social Security as a backup layer of security rather than as a primary pension plan," said Smetters.
This article was reported by Robert Powell for MarketWatch.com.
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I am 68 and I have been paying in maximum since I got out of the navy I had (WHOLE) life insurance that cost me plenty, @ age 62 my policy was suppose to pay me 1.5 million at age 61 I was contacted by NY & Florida courts that my policy was gone and they are looking for some scumball named @%$#@^^ weise, What good doe's it do to plan when they let these scabs to society get away with stealing from everyone, SS is all I have now and since Obama has been in office there has been NO increase in SS and medicare has been cut to 70% and medic gap insurance has increased $35. a month for my wife and myself and they say there is no inflation. I am getting tired of all these chickens (politicians) in the hen house clucking and squcking and not laying any eggs. It is time that congress have to live on SS and not there $millions of special interest money and the same medical that everybody else has to get by on!!!!! . We need to RECALL all these REPUBLACRATS & the PEA Party (woops TEA PARTY) and get everyday people in office NOT some polished politician who has been groomed to party politics and immoral life styles. NUFF SAID
This article is very misleading, ignorant and basically a piece of crap. Here are the facts for my situation regarding Social Security. I retired in January, 2011 at age 66 after working 45 years straight without missing a week of employment. I and my employers contributed the maximum payment amount possible for each year into the Social Security "Trust Fund". The total amount contributed at my retirement was approximately $275,000.00 .
Running the payment figures through a sophisticated Social Security calculator starting 45 years ago and calculating the exact payments made into the trust fund on a monthly interval through 540 months ( 45 years x 12 months) with an interest rate conservatively set at a constant 3.50% APY, my account would have had in January , 2011 approximately $ 601,000.00 .
In essence I prepaid my Social Security in full ( and then alot more) before I retired and it is still earning interest. They still have my own money and now everyone seems to be saying that SS is a Ponzi scheme, that seniors are getting way more out of it than they put into it, etc. You get the feeling that the government wants you to die before you start collecting.. Hence the push by them to put retirement until age 70 . Since the average death for a recipient today is 78 years old, they would have to pay benefits on the average for only 8-9 years.
Right now I receive approximately $2,425.00/ month from Social Security. If I could convert, an annuity from NY Life at age 66 today for the amount listed above would give around $3,250.00/month for life with alot more security than I would receive from our Government.
Folks, put the blame where it should be. Put it on ourselves, we have allowed this to happen when we sat back in front of our TVs and let others carry the ball. Cut back on all the bull, get out of Afghanistan and Iraq. Let them kill each other off, the way they have been doing for years. Do away with foreign aid and all absolutely unnecessary pork projects. Let's worry about our own hungry children. Take the money and put it where it will do some good. Vote the bitches out. Put people in government that are for the US of A, and not lining their own pockets at the expense of the working class and the poor in this country. As a retired soldier, I have been to many other countries that are poor because of corruption and the like. Most of our politicians are what? Lawyers with money. Money crooked from the poor and uneducated people of this land. Why would anyone vote for a lawyer to represent us in congress, the senate, the Whitehouse, and other areas of our government. Look at our war debt. What it is doing to our country and our poor. I have seen all the graft and corruption that takes place in war times. We sent millions of tons of supplies and materials to Vietnam. Much of it never got to our troops, instead falling in the hands of the very people we were sent there to fight against. "Wake Up America!"
"Let's not vote these crooks in and let's vote the crooks that are in....out!" We shook them up during the last election, let's keep it going. Get of your duffs, put down the remote, and take it to the streets and the polls. If we don't stop all the corruption and the like....who will? "Our children?"
Just some thoughts of an old retired soldier, someone that really cares about this country and our people.
"Just do it!"
Social Security was suppose to be a savings fund, not a SLUSH fund !!! Shortfall ? are you serious ? Its BANKRUPT !!! we have a PONZI scheme taking place !! If the current employees dont contribute into S.S. there is no money for SENIORS !!!! DEMAND AN AUDIT WHERE IS THAT MONEY ??????????????
Lets not forget the reason there will be a shortfall in the first place.
The source of the problem dates back almost 60 years. In 1954 President Eisenhower transferred funds from the, supposedly locked, SS Fund account and transferred it into the general fund in order to finance his highway jobs act that built the freeway system. Much, but not all, of that money was paid back.
Then President LB Johnson came up with a way to again loot the SS Fund as a permanent ongoing thing, to artificially boot the GDP and pay for his war in Vietnam.
From that day on the Federal government under every president has stolen all of the SS money and transferred it into the General Fund. There should be trillions of dollars in the fund today but due to the corruption at the top there are only IOUs.
Of course this isn't the only Federal lie. JFK changed the way unemployment is counted to only show new filings which is why the Feds say the unemployment is at 9% when it is really above 22%.
Every administration for the last 60 years under BOTH parties have used "creative book keeping" and outright lies to ignore the mounting debt and placate the American public by propping up the GDP and denying inflation.
Isn't it time we the people acted to end the lies and reclaim our country?
In 2012 a vote for ANY Republican OR Democrat is a vote against America! It is a vote for corruption and a vote for more debt and a weaker dollar. Ultimately it is a vote to make America a 3rd world country.
The Federal government no longer represents the will or the needs of the American people. It is owned by special interests and our politicians are bought and sold like hooker in a 3rd world bar.
It time for the American people to pull the plug or the machine that feeds our money and our future into the pockets of special interests.
I am 53 years old and have worked and paid in to SS for 37 years. Ronald Reagan has raised my retirement age once, Bill Clinton has allowed big companies to use a different bond rate to adjust (lower) my retirement benefit as has George W. and wall street has stolen half of my 401k.
When is big GOV. going to start working for the middle class wage earner that gets up and goes to work every day to keep the country going?
I have 33 years on my present job and at this rate I will have to work another 20 to afford a retirement!
They can't fund SS or Medicare but they have no problem funding BILLIONS in foreign aid to all but 2 countries in the world!!!!!
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