Retirement planning involves taking into consideration a number of important factors, including what it will likely cost you to live comfortably and what income you can expect to receive from various sources. One of those sources for most people is Social Security retirement benefits. The Sunset Hills elder law attorneys explain some of the key facts you should know if Social Security retirement benefits are a factor in your retirement plan.
The Need for a Social Security System
Social Security was established in 1935 by the Social Security Act. Prior to the establishment of the Social Security system, support for the elderly was undertaken primarily by families. The Social Security program is based on contributions workers make into the system during their working years. While you are employed, you pay into Social Security — when it’s your turn to retire you receive benefits. On your paycheck, the contributions will appear as the Federal Insurance Contributions Act (FICA) taxes. For several decades after the birth of the Social Security retirement system, many workers could realistically expect to live comfortably on the combined income from an employer-sponsored pension and their Social Security benefits. Unfortunately, during the decades after that, Social Security benefits failed to keep pace with the cost of living increases. In addition, the concept of lifetime employment with an employer-sponsored pension is all but a thing of the past as well. Consequently, retirement planning now requires a careful plan to provide sufficient income during your retirement years to live comfortably. Although it may not go as far as it once did, it is still important to know what you can expect from Social Security benefits.
How Does the Social Security System Work?
Throughout your working years, you accumulate credits based on your earnings. In 2018, you get one credit for every $1,320 you earn, up to a limit of four credits per year. The amount you need to earn to acquire a credit increases slightly each year. Once a credit is earned it remains on your record forever. If you were born after 1929, you need 40 credits in order to receive Social Security retirement benefits. Therefore, you must work at least ten years over the course of your lifetime to be eligible for Social Security retirement benefits.
When Can I Retire?
You can retire any time you want; however, the earliest you can start receiving payouts from Social Security is age 62 and the latest is age 70. You may choose to begin anywhere in that eight-year span; however, many people choose to delay the start of their retirement benefits until they are older than 62 years old because the longer you wait to start getting payments the larger your monthly payments will be.
How Much Will I Receive in Social Security Retirement Benefits?
Your monthly benefit amount will depend on things such as the age at which you begin receiving benefits and your earnings during the time period prior to retirement. You can find out how much you have paid in to date as well as get an estimate of what your benefit will be by navigating to the Social Security Administration’s website. In addition, the Social Security Administration (SSA) mails out a summary of your benefits each year, about three months before your birthday or you can request a statement at any time by calling the SSA (800-772-1213) and asking for a form SSA-7004 or by downloading the form from the SSA website. Your statement provides a record of your earnings history, the number of credits you’ve accumulated to date, and an estimate of the retirement benefits available if you wait until full retirement age.
There is a maximum retirement benefit amount that changes each year. For 2018, the maximum Social Security retirement benefit amount is $2,788. To be eligible for the maximum benefit amount, however, you would have had to earn the maximum taxable earnings amount for at least 35 years. Contrasting the maximum benefit amount with the average monthly benefit for “all retired workers” in 2018 of $1,404 and it becomes clear that most people will not be able to live comfortably on just their Social Security retirement benefits alone. To ensure that you have sufficient income and resources when you reach retirement age you should incorporate retirement planning into your comprehensive estate plan as early in your working career as possible.
Contact Sunset Hills Elder Law Attorneys
For more information, please join us for an upcoming FREE seminar. If you have additional questions or concerns about Social Security retirement benefits, contact the experienced Sunset Hills elder law attorneys at Amen, Gantner & Capriano, Your Estate Matters, LLC by calling (314) 966-8077 to schedule an appointment.
- Beneficiary Designations and the SECURE Act: Prior Designations - May 5, 2021
- Beneficiary Designations and the SECURE Act: Eligible Designated Beneficiaries - May 1, 2021
- Updating Your Plan: Powers of Attorney - January 17, 2021