FEATURE

Staying Ahead Of Inflation

The new T. Rowe Price Social Security Benefits Evaluator shows you the income you may receive under different situations.

The "big picture" view of your path to retirement is an important step because it enables you to see clearly if you're on track to meet your goals. Social Security benefits will be a major piece of the overall picture because they are among the most predictable sources of income during retirement. And yet, for many investors, the significance of these benefits is often overlooked or misunderstood.

The T. Rowe Price
Social Security Benefits Evaluator

Helping to provide a clearer picture of your future income.

The T. Rowe Price Social Security Benefits Evaluator covers a wide range of goals for retirement, such as those of couples who might want to claim Social Security benefits as soon as possible, or of couples who wish to maximize their benefits. The tool shows the financial impact these choices will have on your benefits. You and your spouse might be able to receive much more in Social Security income in retirement by choosing one goal over another. Once you select your desired goal, the Evaluator provides you with a strategy for achieving it, based on your age, earnings history, and other factors.

The Evaluator also makes it easy for you to compare the benefits of choosing different goals and strategies. Although Social Security formulas are extremely complex, the Evaluator is not— and it gives you a step-by-step approach, making it easier for you to understand your options. The tool also includes a glossary of terms to make your experience user-friendly. The Evaluator also includes a link to the Social Security Administration's website so you can estimate your benefits based on your actual work history, to provide you with an even deeper understanding of your Social Security benefits.

A common misperception of Social Security is that it provides fixed payments, with few options available to reflect your financial needs in retirement. In fact, you have a great deal of control over the income you receive from Social Security. You can decide when to begin receiving benefits, up to a limit of age 70—and that can make a big difference in the total amount you will receive over your lifetime. Given the control you have and the importance of the decisions you make, how should you approach drawing on your benefits—and how can you project what your income will be?

MAKING THE MOST OF YOUR MONEY
Start by thinking about the kind of life you want to lead when you retire, how much it will cost, and where the money to sustain your lifestyle will come from. Remember, you've qualified for your benefits after years of working and the total can be significant—even more so if you're part of a dual-income family—so it is important to make the most of the money you've paid into the system over the course of your lifetime. "Many people have no idea how much money they will be getting from Social Security," says Christine Fahlund, CFP®, a senior financial planner with T. Rowe Price. "And dismissing benefits as a small or even insignificant amount of income is a mistake. You need to know what your Social Security income could be and then make educated decisions about when to take it, based on your personal finances and goals." Here are the major points to consider about your Social Security benefits:

  • You can start collecting benefits as early as age 62 or as late as age 70.
  • Each year you wait to take benefits may increase the amount you receive by 7% or 8%.
  • When a married worker files for Social Security retirement benefits, the spouse may be eligible for a benefit based on that worker's earnings.
  • The Social Security Administration adds inflation adjustments so your benefits keep pace with the cost of living.

 

Illustration by HARRY CAMPBELL
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