Suze Orman: ‘Highly Unlikely’ Social Security Benefits Will Run Out — Learn Why
Written by
Adam Palasciano
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Cory Dudak
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Social Security has been around for many decades and provides a financial safety net for millions of retirees in the U.S. Although, as reported by CNBC, a recent survey of Americans showed just 10% plan to wait until age 70 to collect their Social Security benefits.
At the same time, 90% of survey respondents are aware that if you wait until age 70, you’ll receive the highest monthly benefit based on your previous earnings. A benefit that starts at age 70 is 76% higher than if you start receiving your payout at age 62.
So, why are retirees planning to claim their Social Security benefits earlier instead of waiting until they’re older? It’s because many fear that Social Security will run out sooner rather than later.
Suze Orman’s 5 Social Security Tips, Tricks and Facts
In a recent blog post, financial guru Suze Orman explained why for anyone who is at least age 55 or older today, it’s highly unlikely that Social Security benefits will run out. She shared some tips, tricks, and facts to explain why Social Security benefits won’t run out and to help you navigate the Social Security landscape.
1. Social Security Benefits Could Be Reduced, Not Eliminated
Starting in 2034, Social Security will not be collecting enough money from current U.S. workers to pay out 100% of the benefits owed to retirees. If this were to happen, many people fear their benefits would end. In actuality, the worst-case scenario is that earned benefits would need to be cut by around 25% to deal with reduced cash flow. If Congress takes action before 2034, it’s possible that a Social Security benefits reduction could be avoided.
2. Wait Longer To Claim Social Security If You’re Healthy
It’s a very smart move to wait as long as you can to claim your Social Security benefits if you’re a healthy individual. Orman’s blog reported that a 65-year-old, non-smoking woman in average health today has a 50% probability she will still be alive at age 88. Meanwhile, for a male, it’s age 85.
The fact of the matter is that with the current system, a Social Security payout will be 76% higher if you wait until age 70, as highlighted earlier. Waiting until age 70 to claim your benefits could be extremely beneficial if you do live a long life.
3. Highest Earners Should Wait Until Age 70 To Claim Social Security Benefits
If you’re a high earner, there should be no rush to claim your Social Security benefits as early as possible. In fact, you need to delay starting as long as possible if you fall into this category. If you’re a high earner and you’re married, there is a key point to take into consideration. When one spouse dies, the surviving spouse is only entitled to one benefit: either their own or the benefit of the deceased spouse.
Orman suggested implementing a strategy where the highest earner in the relationship waits until age 70 to claim their Social Security benefits. That way, the surviving spouse will be able to claim the largest benefit possible for the rest of their years.
4. Any Social Security Changes Wouldn’t Affect Those Who Are Close to Retirement Age
Social Security had a funding problem in 1983, but significant changes to Social Security were made to deal with a financial shortfall. The issue was fixed without impacting those who were already close to retirement age.
The most notable change? The full retirement age in which people were eligible to claim 100% of their benefits was gradually raised from 65 to 67. But the caveat was that this change was only made for people who were younger than 43 at the time and did not apply to anyone in their late 40s, 50s, or 60s. So, if there are upcoming changes to Social Security on the horizon, expect that those in their later years will be unaffected.
5. You Can Claim Benefits Anywhere from Age 62 to 70
You may be under the impression that you can claim your Social Security benefits at either age 62 or at age 70. But the fact is that you can claim any time between age 62 and age 70. Each additional month that you delay claiming your benefits earns you a slightly higher payment once you do claim. Waiting until age 70 rather than age 67 will make you eligible to claim 124% of your monthly benefit.
Your full retirement age (FRA) is when your payout is 100% of your entitled Social Security benefit. For anyone born in 1960 or later, your FRA is 67. So, if you claim before age 67, you’ll get less than 100%. At the same time, claiming at 66 and eight months is going to get you close to 100%, whereas claiming at 62 will entitle you to just 70% of your FRA benefit.
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