It should come as no surprise that the pandemic’s ongoing economic effects, including inflation, market volatility, and the prospect of a recession, have caused millions of Americans to rethink their retirement strategies.
Two-thirds of Americans (66%) say they worry more about their retirement income now than they did in the past, according to a new study from the Nationwide Retirement Institute®. This is an increase of 10 points since 2021.
It’s simple to make emotional decisions with long-lasting effects during tense situations like the one we’re in right now. Sadly, according to the report, there are far too many misconceptions regarding Social Security, which serves as the cornerstone of practically every American’s plan for retirement income.
The good news is that you can prevent unanticipated consequences that could result from making an ill-informed decision by getting the correct guidance from a dependable financial expert.
What People Are Getting Wrong About Social Security
A little over half (49%) of customers think that if they apply for Social Security early, their payout will increase after they reach full retirement age, however, this is untrue.
A significant portion of boomers (39%) who are not already collecting Social Security intends to begin making use of their benefits before reaching full retirement age, a move that could prove costly in the long term and should only be made with full knowledge of the potential consequences.
Such misconceptions could have a significant impact on how much money you can save for retirement. Because of this, I believe it’s crucial that even the savviest retirees consult a financial expert or consultant before making a choice regarding Social Security.
Although 91% of poll participants claimed to be at least somewhat confident in their understanding of Social Security, only 7% could name the elements that determine a maximum payout, such as:
Work experience. Your benefits are calculated using your 35 most lucrative years’ worth of monthly average indexed earnings.
Age. Even while you can begin getting benefits as early as age 62, you won’t be eligible for your full benefit until you reach your full retirement age, which varies depending on your birth year, and you would have to wait until age 70 to receive the maximum amount.
Break-even age for benefits.
If you start getting benefits before reaching full retirement age, you’ll get less for a longer time; if you wait until that age or later, you’ll get more each month for a shorter time.
If you wait to start receiving benefits, there comes a time when, if you live long enough, the total of your benefits will be more than the total you would receive if you started receiving them sooner. The break-even age for Social Security is that.
status of marriage. Based on the employee’s 35 highest years of taxable Social Security earnings, the maximum individual retirement payout is calculated. Depending on their individual earning histories, both spouses in a married pair may be qualified to receive the maximum individual retirement benefit.
The maximum monthly payment in 2022 varies from $2,364 for retirees who turn 62 to $4,194 for those who wait until they become 70. It’s also important to remember that choosing to withdraw from benefits early might have a significant impact on surviving spouses.
In the event that one spouse retires before reaching full retirement age (FRA), the other spouse may be locked into a reduced survivor’s pension.
49 percent of adults don’t know or are unsure of the amount of their income that Social Security will replace when they retire. This makes it challenging to create a strategy that will help assure your retirement income will be sufficient to support you in maintaining the style of life you may expect.
Little assistance Can Go A Long Way
A financial expert can assist you in estimating the Social Security income you will get and in locating extra income streams to either augment your Social Security benefits or enable you to postpone claiming until you reach full retirement age.
Annuities, life insurance, mutual funds, and exchange-traded funds are a few potential remedies that could be used (ETFs).
One commonly held misunderstanding that emerged from our study may be welcome news for many retirement investors, especially at a time when inflation is on everyone’s mind. More than two-thirds of Americans are unaware that Social Security benefits are inflation-protected.
According to recent projections, the cost-of-living adjustment (COLA) in 2023 might be as high as 10.5%, potentially acting as a lifeline for many people in the face of rising interest rates and historically high inflation.
Remind yourself that you don’t have to traverse this difficult landscape alone as daily financial news items continue to serve as a reminder that few of us are on a direct path to retirement security. Making the right options for your particular situation might be made easier if you work with a dependable and knowledgeable financial advisor.