Retirement and Social Security: What You Should Know

Approaching retirement age can raise concerns about maximizing your retirement income. Luckily, Social Security is a government program that offers retirement benefits to those who qualify. It can play a significant role in your retirement income plan. This write-up will cover the fundamentals of Social Security, its benefits, and how it can aid in achieving a prosperous retirement.

What is Social Security?

Social security is a program administered by the government that offers retirement, disability, and survivor benefits to qualifying individuals and their families. The program was established in 1935 as part of the New Deal and has been a cornerstone of the American retirement system ever since. You should have worked and paid Social Security taxes for at least ten years to qualify for Social Security retirement benefits. Your Social Security retirement benefits are determined by averaging your highest 35 years of earnings. Therefore, the more you earn and the longer you work, the higher your benefit will be.

When can you start receiving Social Security benefits?

It is possible for you to begin receiving benefits from Social Security as early as age 62, however, your benefits will be permanently reduced if you do so. Alternatively, you can wait until your full retirement age (currently 66 or 67, depending on your birth year) to receive your full benefit, or you can delay starting your benefits until age 70 and receive an even higher benefit. The decision of when to start receiving Social Security benefits is complex and depends on many factors, including your health, financial situation, and retirement goals. Consider consulting with a financial advisor or retirement planner to help you make the best decision.

What will you receive as Social Security benefits?

Your Social Security retirement benefit is determined by your earnings history and your retirement age. It is estimated that the average monthly Social Security retirement benefit in 2022 will be $1,543, according to the Social Security Administration (SSA). However, your benefits may be higher or lower depending on your circumstances.

You can check your estimated Social Security benefit by creating a mySocialSecurity account on the SSA’s website. This can be a valuable tool for planning your retirement income strategy.

Spousal and survival benefits

If you are married, divorced, or widowed, you may be eligible for spousal and survival benefits based on your spouse’s or former spouse’s earnings record. Spousal benefits allow you to receive a portion of your spouse’s Social Security benefits while your spouse is still alive, and survivor benefits provide a source of income if your spouse dies. Spousal and survivor benefits can be complex, and it’s important to understand the rules and eligibility requirements before making any decisions. In addition, you should consult a financial advisor or retirement planner to help you maximize these benefits.

Social Security and Retirement Planning

Social Security can be an important part of your retirement income strategy, but it’s crucial to remember that it is just one piece of the puzzle. Other sources of retirement income may include pensions, savings, investments, and other government benefits such as Medicare and Medicaid.

To maximize your retirement income, you may want to consider:

• Maximizing your Social Security benefits by delaying your benefits start date or using spousal or survivor benefits.
• Building a diversified retirement income portfolio that includes multiple sources of income.
• Creating a retirement budget and income plan that takes into account your expected expenses and income sources.
• Planning your retirement with the help of a financial advisor or retirement planner.

The Future of Social Security

Social Security’s future is a topic of ongoing debate and speculation, with its funding coming from payroll taxes paid by workers and their employers. Its financial stability is a major concern due to the program facing a funding shortfall, projected to worsen over time. This is due to factors such as an aging population, declining birth rates, and longer life expectancies. Proposals to reform Social Security have been put forward, including raising the retirement age, increasing payroll taxes, reducing benefits for high-income earners, and changing how benefits are calculated. Additionally, the changing nature of work presents a challenge for Social Security as more people engage in non-traditional work arrangements and may not contribute to the program through payroll taxes. This could lead to a decline in the number of workers supporting the program.

The future of Social Security hinges on how policymakers tackle the challenges it faces. Though there’s no agreement on the optimal method to reform the program, it’s evident that some action is necessary to guarantee its sustainability and offer economic stability to retirees in the coming years.