The Savings Game: Planning for changes in Social Security

It is no secret that unless Congress stops procrastinating and passes significant policy modifications to existing Social Security regulations, benefits will be seriously reduced. In less than 10 years, there will likely not be enough workers paying into Social Security to fully support the number of workers who will be retiring at existing benefit levels.

In a recent article in Ed Slott’s newsletter, Social Security expert Heather Schreiber makes this point. Because so many U.S. families depend on income from Social Security, her column is mandatory reading for both individuals who currently receive Social Security benefits and those who expect to receive them in the future.

Schreiber points out that no single change to Social Security regulations is likely to solve all the long-term problems. She offers excellent planning advice to both individuals who now are receiving Social Security benefits and those who expect to receive them when they retire.

Unfortunately, according to Schreiber, Congress is likely to continue to procrastinate. Members of Congress have known for years that policy changes must be made, and the longer they take to implement changes, the more likely it is that benefits will be reduced.

As a result, even those who currently receive Social Security benefits cannot expect them to continue at existing levels. It may not be easy, but you should take steps so that you are not dependent on one source of income only. If possible, you should consider part-time employment.

If you have assets that are not providing you very much, if any income, such as significant assets in a checking account or savings account, you should determine if there are better alternatives. If you have investments in retirement accounts, make sure that you take advantage of “catch-up” contributions that are available to you because of your age. If your non-working spouse does not have a retirement account, establish one for him/her with your income. If you have sizable traditional IRA or 401(k) accounts, consider Roth conversions, which will reduce future income taxes. Pay down credit card debt with high interest rates.

For those close to retirement, consider downsizing and moving to a location with lower taxes and lower costs. Reconsider retiring, and work a few more years. Postpone applying for Social Security benefits early; wait until 70, if possible, to maximize income. Learn the basics of Social Security, so you maximize your Social Security income. Maximize Roth conversions before you reach age 73, when required minimum distributions start. Learn when you will be subject to surcharges for Part B and Part D of Medicare so you can plan ahead to avoid them. Consider part-time work after you retire, possibly in self-employment, and learn how to take advantage of tax advantages associated with self-employment. Learn about the advantages of reverse mortgages.

Contact your congressional representative and tell them to stop procrastinating and develop options ASAP that will minimize future reductions in benefits. Tell them to avoid solutions that will limit maximum benefits.

Identify information resources that will help you. Subscribe to Heather Schreiber monthly Social Security column at www.irahelp. I also highly recommend “Retirement Planning Guidebook” by Wade Pfau. This is an excellent source for all aspects of retirement. Excellent information on reverse mortgages is available at Pfau’s website, RetirementResearcher.com.

Bottom line: Urge Congress to act to save Social Security, but take steps now that will help you so you are not totally dependent on what may be a dwindling benefit.

Elliot Raphaelson welcomes your questions and comments at raphelliot@gmail.com.