What Would Your Social Security be Worth If You Viewed It as an Asset?

How much is your Social Security benefit worth? Social Security can provide you with an estimate of your benefit at retirement, but that’s in terms of how much income you’ll receive each year. How much would that income be worth if it were valued as a lump sum asset, like your 401(k) or IRA balance?
 
There’s no easy answer to that question. It depends on a few factors, like the amount of your benefit, when you file for benefits, and how long you live. A writer from the Washington Post recently attempted to estimate the value of Social Security benefits.
 
He assumed a monthly benefit amount of $1,500 dollars, which is pretty close to the average benefit of $1,503 in December 2019.1 According to the Social Security Administration, a $1,500 monthly benefit for a 65-year-old man with typical life expectancy, has a value of $200,910. For a 65-year-old woman, the value is $218,085.2
 
These values increase when you include Social Security cost-of-living adjustments, also known as COLA. These are annual benefit increases to help seniors keep up with inflation. When you factor in historical COLA, the value of a 65-year-old man’s $1,500 monthly benefit increases to $266,105. For a woman, the value increases to $295,350.2
 
Social Security provides a helpful foundation to fund your retirement, but you’ll likely need additional assets, like a 401(k), IRA, annuity, or even a pension. Fortunately, there are steps you can take to increase your Social Security income, such as:
 
Work longer. Your Social Security benefit is based on an average of your highest-earning 35 years of compensation. By working longer, you may be able to replace some of your lower-earning years from earlier in your career with higher-earning years. That could significantly increase your benefit amount.3
 
Delay filing. You get your full benefit if you file at your full retirement age (FRA), which is between 66 and 67 for most people.4 However, you can increase your benefit by delaying your filing past your FRA. You can delay all the way to age 70, and you receive an 8% credit for each year you wait. That means if you delay your filing from age 66 to age 70, you could increase your benefit by 32%.5
 
Ready to plan your Social Security strategy? Let’s talk about it. Contact us today at First Fidelity Group. We can help you analyze your needs and options, and implement a plan. Let’s connect soon and start the conversation.
 
1https://www.ssa.gov/news/press/factsheets/basicfact-alt.pdf
2https://www.washingtonpost.com/business/2020/05/14/thanks-social-security-you-are-probably-better-shape-retirement-than-you-think/
3https://www.ssa.gov/oact/progdata/retirebenefit1.html
4https://www.ssa.gov/benefits/retirement/planner/agereduction.html
5https://www.ssa.gov/benefits/retirement/planner/delayret.html
 
Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.
 
The material is not intended to be legal or tax advice. The insurance agent can provide information, but not advice related to social security benefits. Clients should seek guidance from the Social Security Administration regarding their particular situation. The insurance agent may be able to identify potential retirement income gaps and may introduce insurance products, such as an annuity, as a potential solution. Social Security benefit payout rates can and will change at the sole discretion of the Social Security Administration. For more information, please consult a local Social Security Administration office, or visit www.ssa.gov 20362 – 2020/8/20