As Baby Boomers are getting closer and closer to retirement, they have many questions about Social Security, such as…
Will Social Security be there for me when it’s my time to collect benefits?
For a long time the media has been telling us that Social Security is going bust. Millions of Americans depend on Social Security to fund all or part of their retirement, so this is a huge concern in our country. So do we really need to worry about Social Security going under before we start collecting our retirement benefits?
The 2009 Social Security Trustees Report anticipates that Social Security benefits paid to retirees will exceed Social Security taxes paid in by workers (and earnings on the funds in the trust) beginning in 2016. In addition, the trust fund could be exhausted by 2037. Once the trust fund is gone, benefits will still be paid out, but the taxes collected from people still working will only be enough to cover 76% of the benefits promised.
We will probably see several reforms in the future, including a higher retirement age, decreased benefits for future retirees, etc. Social Security may not look the same as it does now for future generations, but it’s too important to our country to let it fail.
How much can I expect to receive?
An important part of planning for retirement is knowing what resources you will have to help cover living expenses once you retire. For some people Social Security is their only retirement income; for others it’s a small part of their retirement, as they will have pensions and investment income in addition to Social Security. Whatever your situation is, you need to have a good understanding of how much income you will receive from all sources so you can adequately plan for your retirement years.
How much Social Security you receive will depend on several things, such as when you retire, how many years you worked and how much you earned, among other factors.
Generally, your benefits are calculated by applying a formula to your top 35 years of earnings, indexed for inflation. Once your benefit is calculated, it is reduced by up to 25% for people who retire before their full retirement age, and increased by 8% per year for people who wait until after their full retirement age to start collecting benefits. To estimate your benefits, you can use the retirement benefit calculators at the IRS website.
When should I sign up for Social Security?
Probably the most commonly asked question is “when should I sign up for Social Security”? By now, you’re aware that you will receive lower benefits if you apply for Social Security before your full retirement age. The question is, are you better off applying early and receiving benefits for more years, or will you benefit more if you wait until age 66 or later to apply?
How can I get the maximum benefits?
Your parents and grandparents probably never wondered how they could maximize their Social Security benefits, but you should. Because it’s an income stream for life, and because it is increased each year for inflation, Social Security is much more valuable than most people realize. There is nothing wrong with using the Social Security rules to your advantage.
Will my Social Security retirement benefits be enough to live on?
Social Security was never meant to fund 100% of your retirement. It was designed to supplement other income streams (pensions and annuities) as well as your retirement savings. So you should not expect Social Security to be enough to cover all of your living expenses in retirement. On average, Social Security constitutes about 40% of their income.