Some Retirees Are Choosing the Wrong Reason to Claim Social Security Early

There are a lot of Social Security doomsayers out there who are concerned about the program’s future. Our The Long View guest Erin Moriarity isn’t one of them. In the excerpt below, the creator behind the Erin Talks Money channel on YouTube explains why she thinks Social Security benefits won’t run out.

Erin also talked to us about retirees’ fear-based underspending, the value of getting professional advice, and what she learned from her dad’s costly investing mistakes.

Check out the full podcast episode:

‘I Think Congress Has a Huge Motivation to Act’

Christine Benz: Erin, you mentioned that you like to push back on concerns about the future of Social Security. There are certainly a lot of doomsayers out there. Can you talk about why you think that people who are, say, over 50 should feel some comfort that their promised benefits will be there for them when they go to claim?

Erin Moriarity: I mean, point blank, people over 50 vote, and those in Congress know it. If they upset that population, it’s not going to go well for them. They’re going to lose their job. I think Congress has a huge motivation to act. I do think Social Security will experience reform and will see changes. I don’t necessarily know what those changes would be, whether it’s reducing cost-of-living adjustments going forward, increasing the wage cap. I mean, there might be the potential that they try to borrow in order to fund the trust fund, which we’ve never done before. They would have to rewrite the laws, but there’s going to be a way in which they keep Social Security going forward. And I think people over 50 don’t have to worry about changes to their benefits. I think people in my generation, 30s, I think benefits will change, but benefits will be there.

The narrative is often that Social Security is going bankrupt, and that’s not true. There are current workers today who are paying into the system, and that pays out to the current retirees today. It would still be able to pay out what’s coming in, which currently is about 77% of what the payouts would be, but I don’t think benefits would be cut for near-term or current retirees.

Social Security Will Be There, but Save as if It Won’t

Amy Arnott: If you’re a younger person trying to plan for retirement, would you look at your future Social Security benefits and maybe give those a haircut to account for potential reductions in future benefits, or how would you handle those potential changes?

Moriarity: Generally, if I’m talking to somebody who’s in their 20s, 30s, or even their early 40s, I don’t even want them considering Social Security at that point. Not that I don’t think it’s going to be there; I think it will be, but I want you saving and investing in a way where you’re not relying on it because I’d rather you get to retirement and say, oh, I have more than enough, or I can potentially retire early, or I can take extra vacations that I didn’t think I was going to. It’s a better position to get to retirement and have more money rather than less.

I think once you get to your late 40s and 50s, and especially in your 60s, I mean, you’re already at Social Security age—I would look at what those benefits are. I’d build my budget, figure out what my gap is between what Social Security is and how much I want to spend. But prior to 45 or something, save and invest as if you’re kind of blind to what those Social Security benefits would be.

Don’t Let Fear Guide Your Claiming Decision

Benz: You often talk about Social Security pitfalls or mistakes that people can make. What are the big ones that people should be aware of?

Moriarity: I think one of the biggest is one we already touched on: Thinking that the trust fund is going to be totally depleted, meaning that there wouldn’t be benefits for you or that your benefits would be cut. I hear so many people right now saying, “Claim as early as you can so you can get something while it’s there.” And I just think that that’s a fearful mentality. The more we operate out of fear, the worse decisions we tend to make. I think if I look back over the course of my life, I have not made great decisions if I made them out of fear.

I would bring it back to what my budget looks like, what my portfolio looks like, and really, how much security do I need? There’s great value in having a reliable income stream that is inflation-adjusted for the remainder of your life.

Build around what you truly need in your plan, in your budget, and look at what you might need for the next couple of decades, and truly look at what size portfolio you have and what kind of gap you can fill, and make your decision based on that.

If you’re married, factor in that one of you is going to pass away first. It makes a lot of sense in many cases to have the higher-earning spouse delay because whoever passes away, they get to keep the higher earner’s benefit, and that can provide a lot of security to the surviving spouse.