Will Social Security Benefits Support Your Retirement Age?

Published on July 16, 2020

Although individuals can claim Social Security benefits as early as age 62, the retirement age associated with full Social Security benefits had been 65 for many years. That marker has been creeping up over time, with the number currently set at age 67 for people born in 1960 or later. The goal has been to encourage Americans to retire later; the Social Security Trust Fund is only solvent through 2037 and delaying benefits will help shore up the fund.

However, according to a paper titled, “How Sticky is Retirement Behavior in the U.S.? Responses to Changes in the Full Retirement Age,” the increase in full retirement age is not stopping many Americans from retiring and claiming Social Security at the age of 65. The study, published by the National Bureaus of Economic Research (and reported in Investment News) posits that Congress needs to develop new policies – in addition to increasing full retirement age –  to get Americans to retire later.

Adding to this conundrum is the effect that the COVID-19 pandemic has had on the economy and personal finances, with historic levels of unemployment or reduced work. It’s unclear right now how this will play out, but one writer foresees trouble ahead for people born in 1960—who are turning 60 years old this year—because of how Social Security benefits are calculated.

• Each year’s earnings over one’s lifetime are adjusted to index to the growth or inflation of national average earnings; the indexing occurs for the year someone turns age 60 and ends there.
• 2020 earnings are taking a major hit compared to 2019 due to the pandemic, and there will likely be a decrease in the national average earnings this year.
• This in turn reduces the indexed lifetime earnings of everyone turning 60 this year, which reduces the monthly Social Security retirement benefits.
• The author warns that, although unknown right now, average earnings could decline for another year or so, also reducing the benefits of those born after 1960.
• Those who are already retired may see little or no cost of living adjustment (COLA).

This may cause many Americans to re-evaluate their retirement timeline, as they may need to work longer as a financial necessity. This is especially true for those who have not been contributing to a retirement plan.

Build a more supportive portfolio with a self-directed IRA

Many people already understand that Social Security may not be there for them throughout their retirement years or be sufficient to rely on as a sole source of retirement income. As a result, most have retirement plans to support them in their later years. For those who’ve been planning for retirement with a self-directed IRA as part of their portfolio, they understand the need to take control of their retirement planning and diversify their investment allocations.

Self-direction enables investors to include a broad array of non-publicly traded, alternative assets within their IRAs, which provide a hedge against stock market volatility while building retirement wealth. It’s a proactive approach for individuals who are comfortable making their own investment decisions, and who understand nontraditional investments such as real estate, private equity, precious metals, lending, partnerships and  more.

Are you looking to shift your retirement strategy to include alternative assets you already know and understand? Do you want to develop a retirement portfolio that reflects your interests or an area of expertise? If you’re comfortable making your own investment decisions, it’s a great time to plan your retirement from a different perspective. You’ll find a plethora of information about self-directed IRAs on our website. If you have questions about how to get started, you can schedule a complimentary educational session with someone from our team.  Alternatively, you can contact us directly via phone at 888.857.8058 or email at NewAccounts@NextGenerationTrust.com.