A Simple Money Move That Could Save Social Security

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Social SecurityIt's hard to be optimistic about Social Security. With many experts pointing to Social Security's imminent collapse and politicians calling it a Ponzi scheme, millions of retirees and near-retirees now see their financial future in jeopardy.

But what if you were given the choice of delaying taking Social Security in exchange for a bigger payoff down the road? What if our doing so would save the entire Social Security system for generations to come?

How Much Say Do You Really Have?

Right now, the year you were born determines what your normal retirement age is. You do, however, have a choice about when to start tapping into your Social Security benefits -- within limits.

You have an eight-year window -- any time after you turn 62 to the time you turn 70 -- to start getting your monthly checks. And the longer you wait, the bigger those checks will be.

But what if you could put off the payday even past the age of 70 in exchange for even bigger monthly payments? And what if, rather than taking the full amount you're entitled to when you retire, you could choose to take only a portion of your expected monthly payment and open up the potential to get bigger checks down the road?

One insurance expert thinks that such flexibility -- giving retirees more choices about how they take Social Security -- could save the entire system from the doom-and-gloom end so many fear.

Planning a Semi-Retirement Party

Jerome Golden, who helped develop a variable annuity product that pays guaranteed annual income for life, believes that the key to Social Security's survival is to address the new realities of older American workers.

One of those new realities is this: A lot of people plan to continue to work -- in some capacity -- well into their "retirement" years.

These people will have additional income to cover costs, so they'll be less reliant on a monthly check from Uncle Sam. They can leave those funds in the trust and prevent it from going bust, as it is scheduled to do in in 2036.

Are We Just Rearranging Deck Chairs Here?

Let's say that customized Social Security options would indeed save the program money, as Golden asserts in an op-ed piece from December. That assertion raises an important question: Why would beneficiaries take voluntary steps that would give up value?

Golden says that even a modest rate of seniors postponing collecting their benefits could save the Social Security program $200 billion-$400 billion in the next 10 years. But those savings come from not having to pay beneficiaries during the period they're deferring their benefits.

At some point in the future, the higher payments due those retirees have to get paid -- and that's when the big savings could potentially disappear.

In fact, since the proposal states that its reform aspects aren't designed to cut the lifetime value of anyone's Social Security benefit, timing is the key to the proposal. Golden argues that putting off having to pay some retirees will help Social Security get through a demographic bump of Baby Boomers.

But trying to persuade people already nervous about their retirement finances to put off getting benefits could be a tough sell.

What You Can Do Right Now

Although it has its downsides and makes some big assumptions, the Social Security reform proposal has a lot of merit. Having additional options is always a plus for participants. At worst, you can simply pick the same benefits you'd be entitled to receive under the current program. If you think you can do better with the new options, you'll pick them.

Any move to acknowledge Social Security's problems is a good one. But the prudent thing to do is to take your own steps to protect your financial health from any future problems with Social Security. Given the difficulty in getting any sort of entitlement reform passed -- let alone such a fundamental shift in the way the program offers its benefits -- you simply can't afford to count on such a solution happening quickly enough to rescue your retirement.

For more on Social Security and its future:

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1116 Comments

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Judy & Garry

All of us who have paid into SS should demand a line-by-line accounting for the last 20 years.

March 05 2012 at 3:20 PM Report abuse rate up rate down Reply
highplainsbubba

Sounds like the theme here is "Screw yourself so the government doesn't have to do it for you"

March 01 2012 at 6:20 PM Report abuse rate up rate down Reply
jr3houpe1849

Waiting until you are 70 to start collecting sounds great but the bottom line on that plan is how long do most people live past 70 years old. Yes it would keep more money in SS because a large number of people will die before that age.

NO THANK YOU

March 01 2012 at 1:39 PM Report abuse +1 rate up rate down Reply
nightmagic23103

Start benefits at 69 to 75, adjust cap to 1,000,000.00 and yes....throw out every bum in Congress....for those of you who do not know who the bums are....,it is EVERYONE in Congress now, and make sure the new arrivals have a mandate which dissolves all Congressional pensions, puts Congress back on S.S and throws the lobbyists into the Potomac.

March 01 2012 at 12:52 PM Report abuse rate up rate down Reply
ROQINRL

I absolutely DO NOT believe any of us who will depend on Social Security have anything to worry about. Answer - REMOVE THE CAP on income contributions to S/S. Why should I have to pay into S/S up to an annual earnings level of approximately $110,000.00 and Wall Streeters and other thieves don't have to pay anything on their earnings over the current cap. REMOVE THE CAP and Social Security will not have a funding problem anymore!!!
And by all means do not believe the pure crap coming form the Republican politicos and conservative Democreats (now there's an oxy-moron).
Remove the cap and FIX the problem, if there is one.

March 01 2012 at 12:33 PM Report abuse rate up rate down Reply
jwoneill1942

force the politicians off their present retirement system and onto SS (and we would have to force them) and you would be surprised how fast it gets fixed for everyone.

March 01 2012 at 11:59 AM Report abuse +1 rate up rate down Reply
paul-sharon-woof

a good and secure way to protect yours/s , is to put a small portion of your s/s is put it in a swiss banl accout, and dont touch it for 20yrs or so, you can get 30% or more depending on your amount, they also have other options, that would make it more worth your wil. thank you

March 01 2012 at 11:52 AM Report abuse rate up rate down Reply
sstuczynsk

Another simple way to improve they social security system is to remove the cap on salary contributions. All salaries, reardless of the amount you make should be taxed for social secutiry and medicare. If you make a million a year on salary, you pay and your employer pays to social security tax on it all. The present cap is around $110,000.00. What a boost that would give to the ponzi scheme.

March 01 2012 at 11:19 AM Report abuse rate up rate down Reply
ajfrees

Another problem is the payroll tax cut was NOT a cut in taxes but a cut in the amount that we contribute to social security. That means that a troubled fund that is running out of money will run out of money faster due to the politics of playing with this trust fund. The government has "borrowed" money out of this fund for years thinking that there was lots of money there that could be used elsewhere. When are they going to pay back the money they took? I think they are trying to bankrupt the social security system so they can follow their own agenda of having privatized savings. But we know that will not work as look at what has happened to the stock market and its affect of 401K fund. So at least the politicians can be honest and say they are robbing funds from social security so it will run out of money sooner than they have previously forecasted! SHAME ON THE POLITICIANS -BOTH DEMOCRATES AND REPUBLICANS!

March 01 2012 at 10:47 AM Report abuse +1 rate up rate down Reply
2 replies to ajfrees's comment
Bridget

I am dumb founded that nobody (politicians) has brought up the fact that the feds borrowed money from S.S.
Also, I think the federal employee's, including congress should consolidate their retirement funds with social security funds. That should give S.S. a shot in the arm.
I agree with you, they want the Social Security to end.

March 01 2012 at 12:27 PM Report abuse rate up rate down Reply
Judy & Garry

All of us who have paid into SS should demand a line-by-line accounting for at least the last 20 years.

March 05 2012 at 3:19 PM Report abuse rate up rate down Reply
skoczek

THIS IS A LOT OF UNNECSARY CRAP. GET THE PEOPLE WHO SHOULD NOT BE ON SS OFF AND WE WHO EARNED IT WILL BE FINE! I HAD WORKED FORTY FIVE YEARS AND BELIEVE THE SYSTEM NEEDS TO BE
CLEANED UP THE RIGHT WAY NOT HARMING THOSE WHO DESERVE TO HAVE PAYMENTS!

March 01 2012 at 10:42 AM Report abuse rate up rate down Reply