Changes to Social Security
Just in time for the anniversary of Social Security, the government announced an overhaul to its online portal, SSA.gov. The change impacts millions who are receiving or intend to receive Social Security retirement benefits and also younger workers who are interested in using helpful tools to calculate future Social Security benefits.
If you created an online my Social Security account before Sept 18, 2021, or never opened one up, there are specific steps to follow. When you go to www.ssa.gov/myaccount, you will have two options: (1) Login.gov, which is a government account that gives you access to all government agencies, including the IRS and the V-A, OR (2) ID.me, which is commercially owned and meets the government’s security standards. If you have an existing Login.gov or ID.me account, you do not need to create a new one or take any action.
The login process is a bit cumbersome, but once you have established the account, there are a lot of useful resources. The most obvious is that you can use the portal to claim benefits. This is an important decision and one that should be made with thought and a little number crunching. To claim, you need to have worked and paid into the system for at least 10 years, though not consecutively.
The age at which you can draw benefits varies based on when you were born. Full retirement age (FRA) rises incrementally if you were born from 1938 to 1960, after that, the age is 67. While you can claim as early as age 62, doing so will permanently reduce your benefit, by as much as 25 percent, which also could affect a non-working spouse who is claiming on the same record.
Additionally, if you claim early, there could be a negative impact on income (including wages, bonuses, commissions, and vacation pay, or net earnings if you're self-employed, but not pensions, annuities, investment income, interest, veterans, or other government or military retirement benefits). The government deducts $1 from Social Security benefits for each $2 earned over $22,320 in 2024.
Conversely, if you can afford to wait beyond your FRA there is a big benefit, you are entitled to “delayed retirement benefits,” which amounts to up to 8 percent a year more for each full year that you delay, until age 70. Because Social Security benefits are adjusted for inflation every year, claiming later can be even more valuable over time.
Although most people wait until they are a few months away from claiming to even think about Social Security, using the new portal at any age is helpful. If you are close to retirement, working with the “Plan for Retirement” tool can demonstrate the power of waiting and if there are spouses who have both worked, there could be a strategy where one claims at FRA and the other waits. If you are younger, the portal can help you understand the long-term Social Security impact of choosing a different career path, one where you earn much more or less than you are currently earning.
Finally, I am often asked if younger workers should count on Social Security, because it is “broke”. The answer is YES, you should count on it, despite The 2024 Trustees Report showing that the government will only be able to pay scheduled benefits until 2033. At that time, the fund's reserves will become depleted and the money coming into the system (through taxes) will be sufficient to pay 79 percent of scheduled benefits. I believe that Congress will eventually (kicking and screaming) address the problem, because this is a program that impacts far too many voters to be ignored or slashed.