Seniors Guidebook
I am one of the people who has the "opportunity" to retire in 2008. As the first year of the baby boom this represents the start of a development that will stress the social secutity system to it's limits and may bring it down. Certainly it will not survive in it's present form.
I know I will be spending a lot of time researching my options and determining the pros and cons of the choices involved. I plan to use this website as a place to record what I find, the choices that work for me, and considerations for others to inclulde in their own decision making.
This is a companion site to Living on a Fixed Income which is more narrowly focused on money saving tips.
I recently received an estimated benefits letter from the Social Security Administration. It provides estimates of what I can expect to receive under a variety of elections I can make.
The biggest decision is wheither I retire at age 62, age 66, or later. If you retire at 62 your benefit is reduced by 25%. Selecting your returement age is a big decision with a major impact on benefit payments. Unfortunatly, the "correct" choice is determine by three major factors; none of which is under your control.
The largest variable is how long you live. You don't want to run out of money, but you also hate to miss out on benefits if you can help it.
The second big variable is the rate of inflation. As I write this, it looks like the price of everything is headed up. That means money in your pocket sooner will buy more goods and services sooner, rather than later. If you postpone retirement you are going to get paid back with dollars that buy less. One obvious way to "solve" some of the funding issues with Social Security is to let inflation take care of things.
The third big variable is what, if any, return you can earn on the money you receive in benefits. If you can pay off high interest debt with the money the savings from reduced monthly payments may be larger than the benefit lost from early retirement. I plan to expand on this, because it's a complex tompic that will require more extensive explaination.
Finally, The letter says that "In 2017 we will begin paying more in benefits than we collect in taxes. Without changes, by 2041 the Social Security Trust Fund will be exhausted." Now, a lot of assumptions go into that statement and they may or may not be accurate. However, I think there little doubt that as the retired percentage of the population increases and good jobs move overseas, there will be a lot of pressure to reduce retirement benefits.