Legal disclaimer: This information is not considered legal advice, nor does it form an attorney-client relationship. It is merely to inform of situations that I’ve either personally encountered or became aware of through clients.
The “Social Security” program in the United States refers to the governmental program providing payments to supplement income for disabled people and Americans of retirement age. Due to the massive baby boom generation and people living longer since the program was implemented, it has been projected that, by 2034, Social Security may not be able to pay the full promised benefits. Therefore, although most politicians have promised to “not cut Social Security,” most recognize that something must be done to ensure its longevity and changes to the program are being implemented in 2018. One change being made to cut costs to the program is to delay the “full retirement age” used by Social Security to calculate the benefits.
ALTERING FULL RETIREMENT AGE
Social Security’s version of retirement age, known as the “full retirement age,” when you will get 100 percent of your payout, is currently 66. In 2018, newly eligible retirees, who were born in 1956, will have to wait until they are 66 years and four months old before they will be considered at “full retirement age” and be able to receive 100 percent of their monthly retirement benefit. If you claim your Social Security benefits at any point between 62 and a month before your “full retirement age,” your benefits will be permanently reduced because benefits claimed prior to “full retirement age” are hit with early retirement or survivor reductions.
Studies have proposed that millions of dollars can be saved by the government if the formal retirement dates for Social Security and Medicare are extended by two or perhaps even three years. Therefore, you can expect the “full retirement age” to continue to rise.
Right now, the earliest you can apply for Social Security benefits is age 62; however, a person who begins claiming their retirement benefit at age 62 will receive only 75 percent as much money each month as if they had waited until their “full retirement age” to begin claiming benefits. A person claiming a spousal benefit at age 62 would receive only 70 percent as much each month as if they had waited until “full retirement age” to claim benefits. If you wait until you’re 70, your monthly benefit will be higher.
“Full retirement age” already is set to continue rising in the coming years for people born in 1955 and later; for instance, if you were born in 1960 or later, your full retirement age is 67.
By simply raising full retirement ages, without adjustments to the percentage of benefits available, the government could experience savings, but it will greatly impact Americans’ retirement plans. You must take this into consideration when you are doing your Estate Planning. A good estate plan should address any potential disability and your retirement years, not just plan for distributing your assets after your death. Frankly, my dear, for your estate plan you should be aware of what is happening with Social Security.
Kathy Brown van Zutphen is an attorney licensed to practice law in Alabama and Mississippi. She focuses on the “elder law” areas of trusts, estates, and conservatorships. Additionally, she litigates lawsuits and represents small business owners as part of her legal practice. Visit Kathy’s website to learn more: www.al-mscoastallaw.com. You can also reach her at her office: (228) 357-5227.