Episode # 7 - The Truth About Social Security: Calculations, Benefits, and Future Projections Explained

Retire As You Desire

The Truth About Social Security

In this episode of the Retire As You Desire show, we delve into the crucial topic of Social Security and its role in retirement income planning. Social Security can be a major source of income for retirees, making it vital to understand how it works for informed financial decisions.

Episode Breakdown:

1. Importance of a Retirement Income Plan We discuss the need for a solid retirement income strategy, whether or not Social Security is your primary source of income. I share insights from my experience as a Retirement Income Certified Professional (RICP) and the benefits of working with a retirement income specialist.

1. Calculating Social Security Benefits Learn how Social Security benefits are calculated, focusing on Average Indexed Monthly Earnings (AIME) and Primary Insurance Amount (PIA). We explore how benefits are determined based on your highest 35 years of earnings and the effects of early versus delayed benefits.

2. Cost of Living Adjustments (COLA) I explain how Cost of Living Adjustments are calculated using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), and how these adjustments can impact your Social Security income over time.

3. Social Security's Financial Stability Addressing common misconceptions, we review data from the Social Security Administration’s annual report on trust fund depletion and its implications for future beneficiaries. We also discuss potential solutions to funding challenges, such as raising payroll taxes and adjusting benefits.

4. Strategic Planning for Social Security Benefits We explore strategies for maximizing Social Security benefits, including spousal benefits and optimal timing for claims. I offer tips on how to structure benefit claims to ensure a steady income throughout retirement.

Tune in every Friday night for more insights and strategies to help you retire as you desire!

TIMESTAMPS:

• 00:00:00 - Introduction to Social Security in Retirement
  00:01:04 - Importance of Social Security in Retirement Planning
  00:02:41 - How Social Security Benefits are Calculated
  00:05:00 - Understanding Average Indexed Monthly Earnings (AIME)
  00:06:25 - Primary Insurance Amount (PIA) Explained
  00:08:26 - Impact of Claiming Age on Benefits
  00:09:19 - Cost of Living Adjustments (COLA) Overview
  00:10:13 - Example Calculation of Social Security Benefits
  00:12:14 - Understanding Cost of Living Adjustments
  00:13:08 - Deep Dive into COLA Calculations
  00:17:07 - Factors Affecting Social Security Funding
  00:20:01 - Future Projections for Social Security
  00:25:06 - Misinformation About Social Security
  00:27:05 - Current Funding Status of Social Security
  00:30:12 - Demographic Changes and Their Impact
  00:32:41 - Potential Solutions for Social Security Funding Issues
  00:36:28 - Strategies for Maximizing Social Security Benefits
  00:39:39 - Spousal Benefits and Coordination of Claims
  00:43:05 - Restricted Applications and Survivor Benefits
  00:46:07 - Coordinating Income Timing in Retirement
  00:47:11 - Conclusion and Call to Action

QUOTES:

• "This is the most important part of any retirement income plan, whether you have social security or if you don't." - 00:01:04

• "Most people have no clue how your social security income is actually calculated." - 00:02:09

• "Making smart decisions now is going to impact your Social Security benefits in the future." - 00:04:05

• "Your social security income is based on a couple of things: your lifetime earnings and the age at which you start receiving benefits." - 00:04:28

• "If you take your income at 65 versus 67, it's going to be reduced by those 24 months." - 00:08:15

• "If your full retirement age is 67, and if you wait till 70, you're going to receive an 8% increase every single year that you delay." - 00:08:58

• "The cost of living adjustments are going to help you keep pace with inflation on a different level." - 00:09:29

• "If you claim your benefits before your full retirement age, everyone's income is affected. It will be reduced." - 00:40:46

• "You only have a 12-month window to correct this." - 00:38:04

• "Retirement is all about making better decisions, but from a benefit standpoint." - 00:38:35