Editor’s Note: Could you be one of Social Security’s millionaires?
According to a new bestseller on how to increase your Social Security benefits, Get What’s Yours, toting up lifetime benefits, even low-earning couples may be Social Security millionaires.
In today’s Weekend Edition, excerpted from Get What’s Yours, you’ll discover just how much your lifetime benefits could be worth.
And even better… it highlights some of the simple steps you can take to increase your monthly Social Security income.
Social Security is, far and away, Americans’ most important retirement asset.
And that’s not only true for people of modest means.
Middle-income and upper-income households actually have the most to gain, in total amounts, from getting Social Security right.
Toting up lifetime benefits, even low-earning couples may be Social Security millionaires.
And except for the Bill Gateses and Warren Buffetts of the world – whose percentage of the population was exceedingly modest last we checked – Social Security is a very meaningful income source.
So, this book is for nearly every one of you who’s ever earned a paycheck and wants every Social Security benefit dollar to which you are entitled – entitled because you paid for it.
You earned it. It’s yours. It can even be yours if you never contributed a penny to the system but have or had a spouse, living or dead, who did. It may even be yours if you spent some, or all, of your career working for employers who did not have to participate in Social Security.
A Critical Lifeline
Perhaps you wondered, when you got your first paycheck, what the huge deduction for that four-letter word, “FICA,” referenced.
If you learned that it stood for the Federal Insurance Contributions Act, you might have been none too pleased at first, but then assuaged by hearing that these “contributions” – week after week, month after month, year after year, out of each and every paycheck (up to a limit) – would lead to higher retirement benefits.
Even those of us who aren’t super-rich, but have earned and saved a lot, view Social Security as a critical lifeline.
We realize, after the Crash of 2008, that no assets – not our homes not our bonds and certainly not our stocks – are safe from life-altering declines.
We realize that even our private pensions, if we have them, may hinge on our former employer staying in business and inflation not eroding the pension’s purchasing power. (It’s the rare private-sector pension that boosts payments to protect against inflation.)
We also know that we could, with plausible breakthrough medical discoveries, live to 100 or longer.
But isn’t Social Security a bigger deal for the poor?
Actually, it’s not.
To be sure, Social Security benefits are a crucial lifeline for lower-income beneficiaries. And yes, Social Security benefits rise less for higher earners than do their FICA tax contributions.
But benefits do rise with both time and earnings and they involve very big sums.
Take, for example, a 60-year-old couple who both stop working at that age, each partner having earned Social Security’s taxable FICA limit – the maximum taxable amount, starting at age 25.
That maximum was $22,900 in wage income in 1979, when they began working; it’s $118,500 for 2015, going up every year in lockstep with the nation’s average wage increases.
A 60-year-old couple who earned at or above the payroll tax ceiling their entire lives would get $31,972 each – or $63,944 a year collectively – if they began taking benefits at 66, which is their Full Retirement Age (FRA). If they deferred benefits until age 70, they’d get $42,203 ($84,406). That’s 32% higher than their age 66 benefits. Because for every year you wait, Social Security pays you a benefit that’s 8% higher than the year before, even before its annual inflation adjustment.
For such a couple, collecting Social Security at 62 represents a $1.2 million asset.
In other words, you’d need a nest egg of $1.2 million to produce the same amount of annual income that you’ll get from Social Security, assuming you could safely earn 2% a year above inflation on your investments.
How to Get Another $400,000 in Benefits
Now, $1.2 million is more than many upper-middle-income retirees have saved by retirement age.
The net worth of a typical household headed by someone age 65 to 69 is only one-quarter of this amount and much of it is in the value of their home.
And all you have to do is stay alive and those Social Security payments will keep coming each and every month – payments guaranteed by the United States government and protected against inflation.
That’s because every January, you get, by law, annual benefit raises that equal the prior year’s rate of inflation.
Moreover, there is a huge amount of money at stake in maximizing one’s Social Security benefits.
The $1.2 million valuation, large as it is, actually assumes our 60-year-old couple makes the wrong Social Security benefit collection decisions.
It assumes they take their retirement benefits as early as possible and forgo cashing in on what are, to them, free spousal benefits.
If they make the right decisions, they can increase the value of their lifetime Social Security “asset” by more than $400,000, to $1.6 million!
This 33% increase may sound hard to believe, but it’s true. The couple just needs to apply for the right benefits at the right time.
Further reading: Boosting your Social Security benefits is a no-brainer. The problem is figuring out what to apply for and when to do it. With 31,361 different collection strategies, Social Security is the most complicated program you’re ever likely to encounter.
So, if you’re nearing retirement – or are already retired – make sure to pick up a copy of Get What’s Yours. It explains in plain English dozens of simple strategies for getting potentially thousands more in Social Security income. In many cases, all you have to do is place a simple phone call. Claim your discounted copy here.