Investor column: Social Security reigns large in retirement

Regardless of the skeptical view taken by some on the outlook for Social Security benefits or the level of importance these benefits represent in our retirement income plan, the facts tell another story. The importance of Social Security came into the spotlight in the last few weeks as the recently enacted budget and debt ceiling legislation included changes that reduce potential benefits for those who intended to use the File and Suspend or Restricted Application for Spousal Benefits filing strategies.

Benefits can be significant

The typical married couple who retired two or three decades ago is probably receiving benefits of about $1,000 to $2,000 a month. Those retiring in the next 10 to 15 years may well receive benefits of $3,000 to $4,000 a month. The reasons for the higher levels include higher earnings for those working today, and that there are more couples where both spouses worked and are entitled to their own benefits.

Despite the recently enacted change to certain filing strategies, at the basic level Social Security benefits have never been reduced and changes have applied to those who are still many years from retirement. The U.S. Treasury owns the printing press, so I think it's a good bet that Social Security benefits will be paid as planned and be a significant portion of the average family's retirement income plan.

Certain other sources of retirement income may have guarantees, such as annuities or defined benefits pension plans for government workers, but most of these are not backed by the full faith and credit of the U.S. government.

Social Security inflation-protected

Social Security benefits are indexed to the consumer price index and this allows for increases in benefits as inflation occurs. While certain pensions, such as military and for workers employed by state governments, may also be adjusted for inflation, other forms of retirement income like annuities, and income from your investment plan do not have guaranteed inflation protection.

These characteristics make Social Security an important component of a retirement income plan for most of us. Maximizing Social Security income is an important concept to support the long retirements that are becoming more common as life expectancies continue to grow.

It is not uncommon for at least one of a retired couple, if not both to survive into their 90s. If this couple retired in their mid- to late-60s, retirement becomes a 25- to 30-year plan. In a way, this is another career of sorts. Social Security income for a typical couple retiring in the near future where both had careers may well exceed $1 million if they are fortunate to live long lives.

For this reason, reviewing the best way to file for and claim your Social Security benefits can help increase your chances for the success of your retirement income plan. The Social Security system and its rules are complex, but some financial advisers have the ability to help you analyze and plan for this important source of income. This analysis is particularly important for those who recently claimed benefits or those approaching retirement in the next 10 years.

Tom Breiter, president of Breiter Capital Management, Inc., is a registered investment adviser. He can be reached at 941-778-1900 or by e-mail at tom@breitercapital.com

This story was originally published November 16, 2015 at 4:54 PM with the headline "Investor column: Social Security reigns large in retirement ."