- Nine out of ten individuals age 65 and older receive Social Security benefits.
- Social Security benefits represent about 38% of the income of the elderly.
- Among elderly Social Security beneficiaries, 52% of married couples and 74% of unmarried persons receive 50% or more of their income from Social Security.
- Among elderly Social Security beneficiaries, 22% of married couples and about 47% of unmarried persons rely on Social Security for 90% or more of their income.
(Source: Official Social Security Website)
If you’re counting on Social Security to provide you with a secure retirement, think again. Social Security benefits only account for less than half of today’s retirees’ income. Longer life expectancies and the aging of the population will put an increasing burden on the Social Security system, making your own retirement funding more important than ever.
The exact amount of your Social Security benefit will depend upon the number of years you’ve been working and the amount you’ve earned. Retirement benefits are collectible at any time on or after age 62, but can be delayed until age 70. How much you get depends upon when you retire; reduced benefits are paid if you retire between ages 62 and your “normal retirement age,” as defined by Social Security, while delayed retirement credits apply if you wait until beyond your normal retirement age. In some cases, your children and your spouse may also be eligible for benefits on your account.
Note that retirement benefits are not automatic and you must first apply for benefits before you can receive them. Some time is required to process all the paperwork, so plan to apply several months in advance. Regardless of your Social Security options, think of Social Security as only a small percentage of your total retirement plan, and set aside a portion of your income on a regular basis.
What will your benefits be?
The exact amount of your Social Security benefit will depend upon your earnings history. You can obtain an estimate of your benefits at the Social Security Administration’s online estimator. http://www.ssa.gov/retire2/estimator.htm. You can also call the Social Security toll-free number at (800) 772-1213 and request form SSA 7004, the “Request for Personal Earnings and Benefit Estimate Statement.” Complete the form and send it back. You will receive a personalized estimate of your benefits, plus a statement showing your annual earnings. Like reconciling your bank statement, your Social Security summary of annual earnings should be verified against your tax return statements, W2 forms, or your own records. If there are any discrepancies, report them at once.
Where do the Social Security dollars come from?
Social Security contributions are paid by you and your employer. Your contributions were deducted from your paychecks since the day you started working and are matched by an equal amount paid by your employer. These contributions pay for the following:
Retirement benefits: Collectible at any time after age 62 and based on the number of years you’ve been working and the amount you’ve earned. In some cases, your children and your spouse may also be eligible for benefits on your account.
Survivor’s benefits: A form of life insurance coverage available to your spouse and dependents.
Disability insurance: Provides a monthly income in the event you are unable to work due to a disability. Eligibility depends on the number of “credits” you have earned and your age.
Social Security may pay other family members as well
When you receive Social Security benefits, other payments may also be made to:
- A spouse age 62 or older.
- A spouse under age 62 who is caring for a child under 16, or a disabled child who is receiving benefits from your earnings.
- Unmarried children under 18 (or under 19 if they are enrolled full-time in high school).
When you collect your benefit determines what you get
- Currently you can retire at normal retirement age (between age 65 and age 67 depending on when you were born) and receive full benefits.
- Retire between 62 and 65 and receive a reduced benefit.
- Continue working and delay the receipt of benefits, and get a bonus for each year of work past normal retirement age, up to age 70.
Monthly benefit may change
Your monthly Social Security check may change to reflect the following:
- Cost-of-living increases.
- Eligibility for disability benefits after retirement, but before one reaches normal retirement age.
Maximize your benefit
You must apply for Social Security benefits.
Decide whether you’ll collect your own Social Security benefits, based on your earnings and work history, or your spouse’s. Presumably, you’ll want to choose the one that pays the most. If you retire before a spouse, you can collect your own benefits, then switch and choose the spousal benefits if they are greater. (Spousal Benefit Strategy)
- Remember to apply for retirement benefits a few months before you want them to start. Some time is required to process all the paperwork, including Social Security number, proof of age, and evidence of recent earnings (W-2 forms from the last two years, or, if you’re self-employed, copies of your two most recent tax returns).
- Reconcile your Social Security earnings report with your own records at three-year intervals. Report any discrepancies.
- Don’t forget that Social Security checks can go to a former spouse to whom you were married 10 or more years — at 62 for a divorced spouse — at 60 for a surviving divorced spouse – and at 50 for a disabled surviving divorced spouse. Children, in certain cases, may be eligible for benefits under a grandparent’s earnings.
- Bear in mind that “earnings limitations” (which change each year) may limit the amount you may earn while still receiving Social Security benefits. Those limitations end when you reach normal retirement age.
- Keep Social Security records up-to-date if you change your name, in order to have your earnings credited properly.
Guidant Wealth Advisors can help
Trying to figure out when to take Social Security can feel overwhelming. When do you file? When do you start taking benefits? If you are married, should you or your spouse file first?
These choices determine the amount of Social Security you receive, and can impact the overall results of your financial plan. To select the best strategy, you need to consider more than simply maximizing your total benefits. You also should understand how Social Security choices affect your overall plan.
Guidant can help with a personalized evaluation of your Social Security benefits.