Just in time for my annual column on everyone’s favorite Social Security, the administration has announced an overhaul of its online portal, SSA.gov.
The changes will affect millions of people who receive or will receive Social Security benefits, as well as younger workers who are interested in using a convenient tool to calculate their future Social Security benefits.
If you created your online My Social Security account before Sept. 18, 2021, or if you’ve never opened an account, you’ll need to follow certain steps. When you go to www.ssa.gov/myaccount , you’ll see two options:
(1) Login.gov is a government account that gives you access to all government agencies, including the IRS and VA.
or…
(2) ID.me is commercially owned and meets government security standards. If you already have a Login.gov or ID.me account, you do not need to create a new account or take any action.
The login process is a bit tedious, but once you’ve set up your account, there are plenty of resources to help you. Most obvious is that you can use the portal to claim benefits, which is an important decision that requires careful thought and a bit of math. To claim, you must have worked and paid into the system for at least 10 years, but it doesn’t have to be consecutive.
The age at which you can start receiving benefits depends on the year you were born: If you were born between 1938 and 1960, your full retirement age (FRA) increases in stages to 67 years of age thereafter. You can file as early as age 62, but filing can permanently reduce your benefits by up to 25%, which could also affect a non-working spouse filing on the same record.
Additionally, filing early can negatively impact most income (including wages, bonuses, commissions, vacation pay, or net income if self-employed, but excluding pensions, annuity insurance, investment income, interest, and veterans’ or other government or military retirement benefits). The government will deduct $1 from your Social Security benefit for every $2 you earn over $22,320 in 2024.
Conversely, if you can afford to wait beyond your FRA, there’s a big benefit: you’re entitled to “deferred retirement benefits,” which increase by up to 8% per year for each year you postpone, until you turn 70. Because Social Security benefits are adjusted annually for inflation, claiming later makes them even more valuable over time.
While most people wait to think about Social Security until a few months before filing, people of all ages can benefit from using the new portal. If you’re nearing retirement, the Retirement Planning tool can help you see the power of waiting. Another strategy for couples who both work is for one person to file at FRA while the other waits.
For younger people, the portal can help them understand the long-term impact on Social Security of choosing a different career path that could earn them much more or less than they currently earn.
Finally, young workers are often asked whether they should rely on the Social Security system because it is “bankrupt”. The answer is yes, they should. Although the system’s surplus is declining, the 2024 Trustee Report says the government will be able to pay benefits on schedule until 2033.
At that point, the fund’s reserves will be depleted and the money coming into the system (through taxes) will be enough to pay 79% of planned benefits.
As I have said many times in this column, I believe Congress will ultimately (albeit reluctantly) address this problem through some combination of the following: raising the tax threshold (the so-called “Social Security wage base,” currently $168,600), increasing the current FICA tax rates, which are set by statute at 6.2% for employees and employers respectively and 12.4% for self-employed Americans, or raising the retirement age at which one can claim a Social Security pension.
In other words, with a little tinkering here and there, the problem should be solved.
Jill Schlesinger, CFP, is a business analyst for CBS News, a former options trader and CIO of an investment advisory firm. She welcomes comments or questions at askjill@jillonmoney.com. Her website is www.jillonmoney.com.