Most people underestimate the impact that Social Security retirement benefits will have on their retirement. They either assume it won’t be there for them, or that it won’t be enough to make a difference.
The truth is that Social Security will be there for you (although I suspect it will be revised several times to help improve the financial outlook of the system), and it could play a big part in your retirement years, depending on how much other income and assets you have available.
Social Security has several unique features that you won’t see in most financial products available today:
Guaranteed Income: Once you start collecting benefits, they can’t be taken away from you. Benefits may be reduced in the future as Social Security is reformed, but it’s very unlikely that retirees who are already collecting benefits will see their benefits cut.
Predetermined Amount: The Social Security administration sends out benefit estimates to people every year, so you have a pretty good idea how much to expect before you retire. While the amount will vary based on when you actually retire and start collecting benefits, you have a reasonable estimate to use for your retirement planning.
Lifetime Income: One of the greatest benefits of Social Security is that it is for life. Even if you live to age 105, you will still receive benefits. There are very few financial products (other than pensions) that offer benefits for life.
Inflation Adjusted: Another huge benefit of Social Security is the cost of living adjustment (COLA). Benefits are increased each year based on the increase in the Consumer Price Index for the previous year. This helps retirees keep up with rising costs during retirement. While there are a few annuities that offer inflation protection, most pension plans do not offer this feature.
Survivor and Family Benefits: Often overlooked is the fact that survivors and minor children may qualify for benefits after a spouse’s or parent’s death.
As you can see, Social Security retirement benefits have several unique features that aren’t available in most financial products, so you should consider your benefits carefully when planning for retirement.