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Don’t dismiss Social Security

By Jennie L. Phipps ·
Wednesday, November 21, 2012
Posted: 6 am ET

Not long ago, financial advisers took Social Security for granted and offered most people the same advice -- take it as soon as possible. They used the break-even point as an argument for this strategy. The theory went that the age where you would make more by delayed filing is actuarially somewhere in your early 80s. Most people don't live that long, they theorized, so delaying meant that you would collect less overall than you would have gotten if you had taken Social Security at 62. This is especially true if you consider the time value of money, which takes into account how much you could earn in interest over time.

That theory is out of date, James Mahaney, vice president of strategic initiatives for Prudential Financial, told attendees at a presentation offered by Prudential for retirement advisers. "The real risk today is living longer and living beyond your life expectancy," Mahaney said.

Another game changer, Mahaney says, is the number of women who have earned Social Security benefits in their own right. Understanding how to use the joint Social Security filing strategies available to a married -- or even a divorced -- couple can raise payouts significantly and be key to a much richer retirement, says Mahaney, author of the Prudential white paper, "Innovative Strategies to Help Maximize Social Security Benefits."

Add to this the need to understand how Social Security impacts taxes. Dated retirement planning strategies usually advised taking Social Security early so that money in tax-advantaged accounts can go untouched for as long as possible. But tax situations today aren't that simple, Mahaney says. Often it makes more financial sense to develop a strategy that involves spending taxable savings first in order to delay taking Social Security as long as possible and allowing its value to grow. Delayed income credits combined with cost of living adjustments can easily double a Social Security payout.

These factors, combined with the reality that most people will retire without another predictable source of regular income other than Social Security, has dramatically increased its importance. "No other program can match Social Security for its ability to fight inflation, provide longevity protection, shelter income from taxes and guarantee spousal coverage," Mahaney says.

Prudential often hears its younger clients dismiss the importance of Social Security and say they don't ever expect to collect. Mahaney thinks that attitude is seriously misguided. "People have to understand the complexity of this benefit and just how rich it is, so they can fight to keep it," he says.

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Ralph Martinez
November 22, 2012 at 9:13 am

Those who cannot accept that the President of the United States was elected by the majority of the electorate.They are either blind or not informed because they wno't accept the results or the fact that a black president resides in the white house for four more years, need to get a life and move on! because hate and bitterness will get you nowhere. Try listening to other news channels than Fox and you may be better informed. I am retired from the military and earned my benefits , I also pain into social secvurity and retired at age 62. I am now 76 and am saving my money because the South may rise again. Independent voter

November 22, 2012 at 9:12 am

We have the entitlment of all wrong, We as good americans should pay into the fund from our fist week on our job, so that the wise policians can use the money on worth-while programs and give it away to other coutries that burn our flag. Then on the day we retitire from our job after working,for 50 or 60 years. We should have a car accident and be killed, or have a heart attact as soon as we arive home, this would end all the wrangling over the entitlement we dont deserve?

November 22, 2012 at 8:51 am

Steve Jones

November 22, 2012 at 3:00 am

The minute you are elegible for Soc Security grab the money and run. Let's face it. The country is broke. How much longer can that check hit the bank without bouncing? As soon as Obama has driven us into socialism any money due you will probably be taken away and given to someone who never contributed a dime to the program.
Give me a break bagger. Simple fixes to Social Security like raising the cap to over $106,000 which it currently is. That means that higher incomes will still be paying their FAIR share in during their working lives. Raise the retirement age to 67 and then to 70 by mid-century (2150).

robert stone
November 22, 2012 at 8:03 am

sure, if you're still making a great salary at 62, you can afford to not take SS, but if you're like the majority of the work force in this country, SS will be a welcome addition when you reach 62

Doug Bennett
November 22, 2012 at 7:25 am

The simple way to fix all of this is to put ALL government employees on the same plan as the rest of us. They are suppose to work for and are paid by us. What makes them so special? If Senators and Congressmen had to retire on Medicare and Social Security instead of their special plans, it would be fixed ASAP.

Michael Sweeney
November 22, 2012 at 5:13 am

Seams to me it is all a gamble. 401k goes up and down. SS there not there. Does anybody really have your back. If politicians had to rely on SS and its medical then the ones responsible to keep it going would have a vested interest in their own and our well being into retirement. Advice is only as valid as can afford to pay for, even then can you trust that advice to be in our interest.

jim caldwell
November 22, 2012 at 4:02 am

obviously Mr James Mahaney, doesn`t work for a living, i bet he sits at a desk all day, if you do physical work or labor for a living you have to be an idiot to take his advice, most working people can`t work past 62, how do you know your going to live to 70 ?? this is the most asinine advice you can take, so Mr James Mahaney, come on out and do some physical work , i bet you will change your mind

Rebecca Herring
November 22, 2012 at 3:08 am

I find it interesting that this guy tells younger clientele not to dismiss Social Security, but there is not one word in the article in reference to the still unresolved problem that Social Security will have by 2033, when it currently is forecast to run out of reserves and can only pay benefits from its income, which will only pay 75% of the benefits. I hope these younger clientele who don't expect to collect are correspondingly making more investments into private retirement plans.

Steve Jones
November 22, 2012 at 3:00 am

The minute you are elegible for Soc Security grab the money and run. Let's face it. The country is broke. How much longer can that check hit the bank without bouncing? As soon as Obama has driven us into socialism any money due you will probably be taken away and given to someone who never contributed a dime to the program.

Ben Livingston
November 22, 2012 at 12:51 am

I am just a common man that has worked all my life to earn what little retirement I had coming. I took early retiremnet at age 62 because I believe the political atmosphere leaves the continuation of S.S., as we know it, in jeprody. I figured I'd take what I could get before they found some way to take it from in the guise of private enterprise. My 401 k showed me proof of this. I couldn't take any more losses. Better to be a pauper with a little money then a totaly broke pauper living at he mercy of the breuacrats ( or rather corperations ) running things now.