Americans greatly depend on just two major sources with regards to retirement income namely the Social Security and the Employer Pensions. However, most of these people won’t be able to depend on these alone to render them income since Social Security benefits are becoming less and the number of employers who provide pensions are becoming few.
Hence for the majority, personal savings have turned out to be an essential part of retirement income.
Social Security
To pass for the series of its benefits, you must be able to render contributions to the system for a total of ten years. The basis of your benefits would also be your earnings before you reach the age of retirement.
The good side is that benefits rise with inflation. The down side is that the earning used to determine the amount of benefit is capped. The cap is a disadvantage for those people who earn huge income for they will receive proportionately less of their pre-retirement earning compared to those who earn below the cap.
In order to receive full benefits from your social security, you need to be on the right retirement age. The retirement age before is 65. However, actual required full retirement age is increasing for those born in 1938 or later. It reaches the ripe age of 67 for individuals born after 1959.
If you want to estimate the benefits, you can log on to the website of Social Security Administration at www.ssa.gov. Another way is to review the annual statement that will be sent by the SSA around three months prior to your birthday. If it has not arrived yet, then you can just request online.
Early vs. Late Acquisition of Benefits
You can choose to start getting your benefits even as early as 67. However, expect that you will receive fewer benefits compared to if you have waited for your actual and full retirement age to come first. For instance, 66 is your full retirement age and you decided getting your benefits by age 62. Then you will be receiving just around 75% of the amount you are supposed to have. For every month that you wait patiently for until you reach the actual age, your monthly benefits are set to increase. So in this example, by age 63, you will get about 80% of the actual amount.
As an extra option, you can settle to delay your acquiring of the benefits of your retirement plans up to a year or more of your actual retirement age and add up to the amount you will receive every month. For example, your full retirement age is 66, then each time you go a year more beyond that age, then you are to get an additional 8% each month. Therefore, if you wait until age 70, then you are most likely to get 132% of your monthly benefits.
Better take note that even if you will receive less payment monthly when you decide to take your benefit early, over your lifetime, it would have amounted more. Meantime, you might get more monthly benefit if you take it late in age, but over your lifetime, you will really receive less. The choose is really up to you and will depend greatly on how much longer you will live. If you want to know more about varying benefits at different age levels, visit the SSA website.
Spousal benefits is also available
Even if your spouse does not have any earnings with Social Security, he or she will still get the benefits because of your record. Your children will also be eligible but this will depend on their age.
For your spouse, he or she will get 50% of your benefits once you have reached your retirement age. You will also lessen your spouse’s benefit if you will get your benefits earlier.
The spouse is entitled to receive either his or her own social security benefit or that of his or her spouse, whichever is higher.
This data is distributed for informational purposes only, with the understanding that Doeren Mayhew is not rendering legal, accounting, or other professional advice or opinions and assumes no liability in connection with its use. Please contact Doeren Mayhew for more information.
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