The Unexpected Social Security Benefit That Can Help You Secure A Loan

When it comes to retirement, many Americans rely on Social Security benefits. According to the Social Security Administration, in June 2024 51.2 million retired workers collected $98.2 billion in benefits. To make that more clear, almost nine out of every 10 Americans over the age of 65 were receiving Social Security benefits that month, with those benefits representing around 30% of their recipients' total income. However, some retirees rely on those benefits more than others. For example, Social Security benefits made up 50% (or more) of the total income for 42% of women and 37% of men over the age of 65. Meanwhile, Social Security benefits made up 90% or more of the total income for 15% of women and 12% of men in the same age group. All of this is to say that Social Security benefits are a significant part of many American retirees' lifestyles.

While Social Security was never intended to function as the primary source of income for retirees, it is increasingly necessary for many. According to a 2024 survey from Bankrate, despite the fact that just 53% of not-yet-retired U.S. workers anticipate needing to rely on Social Security, 77% of current retirees reported being reliant on their Social Security benefits in order to pay for necessary expenses. However, while most of us know about the monthly benefits amounts associated with Social Security retirement, there can be some additional perks of this income you might not have realized were available to you.

An important additional perk of receiving Social Security benefits is that the Social Security Administration can provide you with something known as a benefit verification letter. This letter allows you to essentially prove your income, which can be especially important if you find yourself needing financial documentation. This can include anything from applying for a loan to renting property to qualifying for other benefits. Plus, it can be necessary for certain applications, like a visa (more on that later). As Justin Godur, a financial advisor, explained to Reader's Digest, "This verification can be a lifeline."

Since the most common kind of documentation used to verify income is paystubs, which retirees generally don't have anymore, a benefit verification letter can serve as an important alternative. Keep in mind that if you are looking to apply for a mortgage or even rental agreement, your tax returns and bank statements will probably also be required. Personal and auto loans can similarly require extensive financial information, but having your benefits verification letter can definitely help you speed up the process of proving your total income when applying for any kind of loan or other financial credit. With this in mind, it's important to remember that Social Security is not meant to be your primary or sole source of retirement income. Ensuring you have the proper documentation for your retirement accounts (whether that's a 401(k), IRA, or Roth IRA, or any combination of these) can be equally important when it comes to proving your total income.

In addition to verifying income for things like loans and benefits applications, Social Security income verification can also be important for anyone hoping to retire abroad. In addition to Social-Security-provided international retirement planning services for those considering retiring abroad, income verification can be an important element of your visa application process. Certain countries like Portugal have visas geared towards foreign retirees that require a certain guaranteed income amount in order to be approved. These foreign visas generally don't allow retirees to work in their selected country, so having guaranteed income from the U.S. (whether through rental income, retirement accounts, or Social Security benefits) can be an important requirement in order to retire abroad.

While income verification can be important for a myriad of potential financial needs, it can be slightly more complicated to determine what your retirement income will actually be. As always, it's important to consider the monthly benefits amounts you may be entitled to depending on when, exactly, you choose to retire. Delaying retirement can lead to an additional 8% in benefits amounts for every year you wait (up until age 70), whereas early retirement can lead to an up to 30% cut in your benefits amount depending on when you were born, according to the Social Security Administration. Making sure to factor in not just your current financial needs but also your potential future needs before retiring can be essential to ensuring you are able to financially afford the lifestyle you want in your golden years.