Social Security is a government program that’s supported United States citizens for several generations. Most people take advantage of this program when they enter their retirement years. Understanding Social Security and its main benefits are crucial to your quality of life. Take a look at the top 12 things you must know about Social Security right now.
This program uses credits as a way to verify if you’re eligible for Social Security. The average, full-time worker can earn up to four credits each year. If you accumulate 40 credits, you’re eligible for Social Security. With this calculation, most workers are eligible after 10 years of employment.
Coming of Age
Social Security cannot be claimed for retirement until a certain age. The youngest age to start payments is 62 years. Keep in mind, however, that the payment amounts will be lower than retiring at an older age.
According to the Social Security website, most age groups will enter full retirement age at 67 years. You’ll receive a monthly amount that’s around 20 to 30 percent higher than claiming the amount at 62 years. This time frame should be carefully considered because your monthly income will fluctuate as a result of these decisions.
Waiting Until 70 Years of Age
The ideal way to maximize the amount of money paid out to your account is by waiting until age 70 for Social Security benefits. In fact, you must start payments at this age. You’ll be set at the highest amount for your income calculation. The monthly amount is higher than earlier claim times because the benefit is stretched out over fewer years.
Calculating the Benefit Amount
Social Security uses a specific formula to figure out your monthly amounts. They take 35 years of earnings and calculate an average. If you make a lot of money, the benefit will be as close to the maximum as possible. Low-wage earners will see a fair amount based on their income. The benefit is meant to be a solid start to retirement but won’t cover every expense. Americans must still save their personal funds to supplement these benefits.
Understanding of Death Benefits
If you’re a recent widow or widower, you can apply for survivor benefits. In most cases, you receive 100 percent of the amount that your spouse would’ve received in the first place. A lump sum for death benefits is also possible. Divorced spouses can also receive some benefits in specific cases. Reading up on your particular situation will help you through these tough times.
Knowing About Cost-of-Living Adjustments
Your monthly amounts won’t be fixed when it comes to inflation. The Administration offers a cost-of-living adjustment or COLA in order to make the funds fair over the years of financial changes. These yearly adjustments are based on the financial conditions in play. Your payment might rise between 0.3 or 5 percent in a given year, for example. Keep in mind that some years don’t have a COLA because of various factors.
Taxing the Benefits is Normal
Prior to the mid-1980s, Social Security benefits were tax-free. Prepare for yearly taxes when you start claiming this benefit now because it is taxable. Low-income people may only see a tax on 50 percent of their benefits, but others may need to pay on 85 percent of their amounts. Save some of your monthly funds so that you can pay the taxes on the amounts when the season arrives.
Working and Earning Benefits
When you claim benefits before full retirement age and you’re still working, the monthly amount will be reduced. The Administration uses a specific formula to make the benefits fair while allowing you to work as desired.
After your full retirement age, there are no reductions in the benefits. You can work as much as you like with the benefits of paying out as designed.
Knowing About Coverage For Children and Disabled Persons
Social Security isn’t just for retirees. Children who’ve lost a parent are eligible for that deceased person’s payments to a certain percentage. Disabled people can also claim benefits based on parents’ work numbers. The Administration uses these funds to support people who’ve dealt with an early loss or permanent disability. In fact, around 20 to 30 percent of the fund is used for payments other than retirement.
Benefiting From Spousal Coverage
If you’re a married couple entering the retirement years, you have some choices to make. Each person, assuming they’ve both worked for enough Social Security credits, has a unique payment amount set by Social Security. One spouse, however, might have a really low amount when compared to the other spouse.
The spouse can apply for spousal coverage, which is equal to 50 percent of the partner’s amount. For many couples, this amount is much more than the standard coverage. Be sure to read over your options before choosing the coverage.
Stopping and Starting
A unique part of Social Security is the do-over. You may have claimed benefits at age 62. A few months into the payments, however, you decide that you want to wait until age 70 to claim the higher amount. You can pay back the benefits given to you already and stop them entirely. The Administration will stop paying you until age 70. Those payments will be the higher amounts with no penalties otherwise.
Retiring Ages Differ by Birth Year
The Social Security Administration has changed certain retirement years based on birth years. Baby Boomers who were born in the 1940s and early 1950s have a different full retirement age when compared to people born in the late 1950s or later.
Compare your birth year to the latest rules set forth by the Administration. Some birth years can claim benefits earlier than others. Remember that your generation may be different than others.
The Social Security Administration has a comprehensive website that can help you if there are any further questions. Be proactive about your concerns and questions because you’ve paid into this program. During retirement, it’s your turn to reap the rewards of your decades of saving.