OPINION

JUST PLAIN TALK: Social Security update to think about

Buz Livingston
Buz Livingston

For someone with a hankering for writing about finance, Social Security is like a gift that never stops giving. At my age, it's not theoretical either; check that, at our age. Because for married couples, and even those divorced or surviving spouses, there is an interplay between benefits.

We're entitled to Social Security benefits; call it an entitlement, it's no big deal, sticks and stones, as the old proverb goes. Since we're over age 62 and still have jobs, delaying Social Security is an easy call. Yes, our benefits would be reduced since we are under full retirement age, but that's a bit of a misconception. A benefit reduction because of earned income is repaid at full retirement age. The reason we hold off is the eight percent delayed retirement benefit we earn, every year we wait. Not everyone can, nor everyone should, but if you're still working and in good health, there's no reason. Lower earners, still working, may see more of the Social Security benefit taxed. Social Security benefits could push higher earners into an upper tax bracket. However, if you've lost your job, have health issues, or have a physically demanding occupation, it's a different calculus.

The media, liberal, conservative, and moderate, do an abysmal job reporting on Social Security.

Regardless of their bent, they lead with "bankruptcy" or "insolvency," but it's more nuanced. In 2035 the Social Security fund will be depleted and only able to pay 79% of projected benefits. Some may look at the potential reduction as the rationale for beginning their benefit, but that ignores math. If you choose early benefits, any reduction will be from a lower amount. Medicare premiums deducted from Social Security will take a bigger bite, and cost of living adjustments will have a lower impact. If you need to file early, do it. But if you file early because you're worried about Social Security, don't.

The optimal strategy depends on how long you live. For singles, it's easier to strategize. However, married couples have to balance the differences in benefits, longevity, and age disparity. In addition, emotions can color the decision to delay benefits and spend down assets. The best strategy depends on how long you live and we don't come with expiration dates.

Cutting benefits is unacceptable. Too many Americans rely on Social Security benefits for retirement income. I was not too fond of it when Reagan raised the tax rate in 1983, a position I still maintain. Congress can raise the Social Security tax rate, change the law by covering the shortfall from general revenue, or reduce benefits. Outside changing the law, the most palatable reform would be to create a "donut hole" where wages over $400,000 are subject to Social Security taxation in conjunction with the current cut-off, $142,000.

I think Congress will fix Social Security; it will be hard to keep their job otherwise.

You can't always get what you want, but Buz Livingston, CFP, can help you figure out what you need. For specific advice, visit livingstonfinancial.net or drop by 2050 West County Highway 30A, M1 Suite 230.