You Might Have the Best Pension Ever Created

by Jeff C. Johnson

Hundred dollar bills

Too many people downplay the importance and value of Social Security retirement income (SSI) or take a casual approach to electing their distributions. Let me be clear that SSI might be the best pension ever created (that’s my opinion, not my employer’s).

Here’s why. One can claim SSI at retirement age, early at 62 or later starting at 70 for increased income. Often corporate pensions (the few left) offer no additional income for participants who decide to retire at an age past normal retirement. SSI offers an increase of two-thirds of 1 percent for every month that participants delay claiming income past their Full Retirement Age (FRA) up to 70! If you were born in the years from 1943 to 1954, your FRA is 66. Delaying for 48 months until age 70 to claim your benefit increases your income 32 percent ... for life and potentially for the life of your surviving spouse! (Just because you retire from the workforce doesn’t mean you have to collect benefits right away.)

Few corporate pensions are adjusted for inflation. When you retire, that monthly amount is the amount you will get for life, with no adjustments for the devaluing of the dollar. This is a pretty big deal.

Social Security is adjusted for inflation automatically. Since 1975, a cost-of-living adjustment (COLA) has been made every year except 2010 and 2011, and the biggest adjustment was 14.3 percent in 1980.

Corporate pensions may allow payments to a survivor, such as a spouse, but if that “joint and survivor” election is made, the amount of the payment is permanently reduced to compensate for the actuarial likelihood that payment could be for a longer period than over a single life. Even if the pension recipient survives her or his spouse, the payment is still reduced for life!

Social Security payments can be claimed by a surviving spouse, assuming the payment is more than the surviving spouse’s own SSI; the survivor only collects the higher of the two payments. Yet there is no reduction in the payment for this option.

If this isn’t the greatest pension ever designed, it’s pretty darn good. Why wouldn’t a person take time to maximize their lifetime income from this amazing benefit?