At
Bogetto and Associates, we understand how important retirement planning is for you and your families piece of mind. We have several
financial strategies and planning tools to help you work toward achieving your retirement goals, and social security income may be part of that strategy. It's important to understand
how Social Security works and what you can expect when you become eligible for Social Security benefits. Here is some information directly from the Social Security Administration's website to help you understand this complex system (
www.ssa.gov).
Social Security reaches almost every family, and at some point, touches the lives of nearly all Americans. Social Security helps older Americans, workers who become disabled, and families in which a spouse or parent dies.
Today, about 168 million people work and pay Social Security taxes and about 60 million people receive monthly Social Security benefits. Most beneficiaries are retirees and their families — about 42 million people. But Social Security was never meant to be the only source of income for people when they retire. Social Security replaces about 40 percent of an average wage earner’s income after retiring, and most financial advisers say retirees will need 70 percent or more of pre-retirement earnings to live comfortably.
To have a comfortable retirement, Americans need more than Social Security. They also need private pensions, savings, and investments. The current Social Security system works like this: when you work, you pay taxes into Social Security. Social Security then pays benefits to:
• People who already have retired;
• People who are disabled;
• Survivors of workers who have died
• Dependents of beneficiaries.
The money you pay in taxes isn’t held in a personal account for you to use when you get benefits. Social Security uses your taxes to pay people who are getting benefits right now. Any unused money goes to the Social Security trust funds, not a personal account with your name on it.
Your Social Security taxes
Social Security taxes that you and other workers
pay into the system are used to pay Social Security benefits.
You pay Social Security taxes based on your earnings, up
to a certain amount. In 2016, that amount is $118,500.
Where your Social Security tax dollars go
When you work, 85 cents of every Social Security tax
dollar you pay goes to a trust fund that pays monthly
benefits to current retirees and their families and to
surviving spouses and children of workers who have died.
The other 15 cents goes to a trust fund that pays benefits
to people with disabilities and their families.
From these trust funds, Social Security also pays the
costs of managing the Social Security programs. The entire amount of taxes you pay for Medicare goes
to a trust fund that pays for some of the costs of hospital
and related care of all Medicare beneficiaries. The Centers
for Medicare & Medicaid Services, not the Social Security
Administration, manages Medicare.
How you become eligible for Social Security
As you work and pay taxes, you earn Social Security
“credits.” In 2016, you earn one credit for each $1,260 in
earnings — up to a maximum of four credits a year. The
amount of money needed to earn one credit usually goes
up every year.
Most people need 40 credits (10 years of work) to qualify
for benefits. Younger people need fewer credits to be
eligible for disability benefits or for their family members
to be eligible for survivors benefits when the worker dies.
Retirement benefits
Choosing when to retire is one of the most important
decisions you’ll make in your lifetime. If you choose
to retire when you reach your full retirement age,
you’ll receive your full benefit amount. Your benefit amount if you retire before reaching full
retirement age may decrease.
Full retirement age
If you were born from 1943 to 1960, the age at which
full retirement benefits are payable increases gradually
to age 67. If your birth year is 1948 or earlier, you already
are eligible for your full Social Security benefit. Here is more info on finding your full retirement age:
Year of birth is 1943 - 1954 Retirement age = 66
Year of birth is 1955 Retirement age = 66 and 2 months
Year of birth is 1956 Retirement age = 66 and 4 months
Year of birth is 1957 Retirement age = 66 and 6 months
Year of birth is 1958 Retirement age = 66 and 8 months
Year of birth is 1959 Retirement age = 66 and 10 months
Year of birth is 1960 or later Retirement age = 66
Delayed retirement
If you choose to delay receiving benefits beyond your
full retirement age, you will increase your benefit a certain
percentage, depending on the year of your birth. Social Security will add the increase automatically each month from the
time you reach full retirement age, until you start taking
benefits or reach age 70, whichever comes first. For
more information on delayed retirement credits, go to
www.socialsecurity.gov/retire2/delayret.htm.
Early retirement
You may start receiving benefits as early as age 62 but Social Security will reduce your benefits if you start early. Your benefits will be reduced about one-half of 1 percent for each month you
start your Social Security before your full retirement age.
For example, if your full retirement age is 66, and you sign
up for Social Security when you’re 62, you would only get
75 percent of your full benefit.
Can I still work and get benefits?
You can continue to work and still receive retirement
benefits. Your earnings in (or after) the month you reach
full retirement age won’t reduce your Social Security
benefits. In fact, working beyond full retirement age can
increase your benefits. Your benefits will be reduced,
however, if your earnings exceed certain limits for the
months before you reach your full retirement age.
If you work, but start receiving benefits before full
retirement age, their is a deduction of $1 in benefits for each $2 in
earnings you have above the annual limit. In 2016, the
limit is $15,720.
In the year you reach your full retirement age, your benefits will be reduced $1 for every $3 you earn over a
different annual limit ($41,880 in 2016) until the month
you reach full retirement age.
Once you reach full retirement age, you can keep
working, and your Social Security benefits will not be reduced,
no matter how much you earn.
There is much more that you can learn about your Social Security benefits such as how your benefits will be taxed, family benefits, disability benefits, benefits for widow and widowers and much more. If you need a trusted financial adviser to help you understand your benefits, then please contact us. We can help explain how Social Security is just one tool for retirement and give you options to work towards your
retirement financial goals...Now and for Tomorrow!
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