At a Wednesday night gathering of about twenty senior citizens for a “Maximizing Your Social Security” program at the Falls of the Schuylkill Branch of the Free Library, the 30-something presenter pinpointed what she called “the million dollar question”.
When it comes to calculating the financial needs of retirement, “we need to solve for ‘x’, and we don’t know what ‘x’ is.”
“X”, of course, in a discussion of Social Security benefits, is the recipient’s date of death – though presenter Stacey Piona of Principal Funds investment firm prefers to mitigate the term as much as possible. Her audience, many of them East Falls Village members in their 50s and 60s, were unfazed.
A strained system
Wednesday evening’s presentation on the maximization of Social Security benefits began with a brief discussion of the government program’s original goals, in comparison to how Social Security is received and used today.
Piona noted that while Social Security was originally expected to provide only 40 percent of the average recipient’s retirement income, almost half of the citizens who receive Social Security today are living on those benefits alone. Since its inception, the system has undergone about 16,000 legal changes, but in many ways, it’s still behind the times, particularly as it faces the retirement of the baby boomers.
Co-presenter Chris Camburn, a Certified Financial Planner at 1406 Financial, likened the impending passage of the boomers through the Social Security system to forcing a golf ball through a hose. Originally designed when the average U.S. life expectancy hovered in the mid-sixties, a mere five years after retirement age, the Social Security system must now handle a population that routinely lives into its nineties. The sheer volume of the boomer generation, versus the smaller numbers of Generation X now in the workforce, also strains the system in unforeseen ways.
The 30-minute presentation, followed by an in-depth, accommodating Q&A, focused on the ways recipients can maximize the benefits due to them, and addressed questions of when to begin collecting Social Security benefits, with the attendant issues of tax brackets, provisional income (including investments, IRAs and pension payments), inflation, the annual acceleration of benefits, and claim and suspension processes for those who continue to work after they become eligible for benefits.
Breaking down spousal and survivor benefits
Much of the discussion focused on the distinction between individual, spousal and survivor benefits. Murmurs of “I never knew about that” arose at several points, particularly during an explanation of a married individual’s option to receive 50 percent of his or her spouse’s benefit, in lieu of a smaller individual benefit. This option is even open to former spouses of an individual with a higher benefit, provided the marriage lasted ten years or more.
When a confused attendee asked how that fit with the traditional perspective of receiving what you paid in throughout your career, Piona suggested “taking the logic out of Social Security” to ponder the situation, and told of one case she encountered in which each of one man’s six former spouses collected a 50 percent benefit, without affecting the amount still due to the man himself. Had he married again, his seventh wife, upon reaching retirement age, would also have been eligible for a 50 percent benefit – after at least nine months of marriage.
“Did Newt Gingrich get involved in writing this legislation?” one man quipped.
The presenters acknowledged concerns about the solvency of the modern system, but repeatedly assured attendees that impending changes to the system would not affect those currently closest to retirement – “grandfathered” in, they are guaranteed consistent benefits.
However, Camburn admitted, it will be a different story for younger generations, who will almost certainly face steep tax changes and successive increases in age requirements, to keep the system solvent for the long-lived populations of the 21st century.
Another attendee gave her advice for younger generations, facing a more uncertain world upon their own future retirement: “just have four or five kids, and then you’ll be fine.”
Despite the vagaries and even apparent absurdities of the system, from confusing tax regulations to the dilemma of whether to delay the collection of benefits, Camburn emphasized that people should always be sure to at least stay informed.
“When you understand what your benefits really are, you make better choices,” he said. “You should know enough to ask the right questions.” He asked how many attendees had been living in East Falls for 20 years or more, and then asked how many people had paid more for their most recent car than they had paid for their first house. At least one attendee raised his hand.
Imagine the same situation playing out again 20 years in the future, Camburn urged. “You’ve got to know how to maximize your benefits.”
East Falls Village
East Falls Village, an initiative of the East Falls Community Council, is a paid membership network for local senior citizens. In addition to organizing and promoting educational and social events, it also aids in a wide range of services to its participants, including transportation, referrals to vetted contractors and service providers, tax preparation and bill-paying assistance, property maintenance and computer help.
Events like Wednesday night’s Social Security discussion, and a session on Medicare that was held in December, are developed at members’ suggestions. Social Education Committee leader Frances Jueds, a retired editor, enjoys planning a wide variety of other events, like walks, tours, and visits to local cultural institutions.
Fellow Committee member and East Falls resident Katy Hineline enjoyed the “very personal” atmosphere of December’s Medicare session, where attendees gained answers to specific questions, and Jueds looks forward to future sessions on retirement planning as well as discussions led by a licensed social worker on aging-related topics. Village member Fred Vincent, a retired Philadelphia schoolteacher also in attendance, now enjoys giving tours in and around the city, including an upcoming East Falls Village tour of the Swedish Museum and Navy Yard on Jan. 24.