Social Security is going to be very important for most people who are planning ahead for their retirement years. You should understand the facts as you look toward the future so that you can create a sensible retirement budget.
You become eligible for Social Security through the accumulation of retirement credits. It is possible to earn up to four credits in a year. In 2014, you accumulate one credit for each $1200 that you earn.
If you pay taxes on $5000 or $5 million in 2014, you still get four retirement credits. Once you have at least 40 credits, you will qualify for Social Security when you reach the age of eligibility.
The exact date of Social Security eligibility will depend on the year of your birth. If you were born between 1943 and 1954, you will be eligible to receive your full benefit at the age of 66.
The eligibility age then rises by two months each year. To clarify, someone born in 1955 would become eligible for their full benefit at the age of 66 years and two months. The age of eligibility graduates in this manner until 1960. Those who were born in 1960 and after become eligible for Social Security at the age of 67 under currently existing laws.
You do not have to wait until you are eligible for your full benefit. It is possible to take an early benefit when you are 62 years of age. However, if you go this route, you will be receiving a reduced benefit.
There are also limits with regard to how much you can earn without being penalized if you take an early benefit. If you wait until the age of full eligibility, you can earn unlimited income and still receive your full benefit without any penalties.
Delayed Retirement Credits
You can retire early, but you can also delay retirement beyond the date of full eligibility. If you do this, you accumulate delayed retirement credits until you are as old as 70 years of age.
Ultimately, you would be receiving a larger benefit when you do start to draw a Social Security direct deposit.
When you are engaged in your retirement planning efforts, you should find out exactly what you can expect from Social Security. Your payout is based on your 35 highest earning years. The more you earned, the more you will get when you become eligible for Social Security.
The maximum benefit in 2014 is $2642.
If you want to find out how much you can expect to receive, you can visit the Social Security Administration website.
Comprehensive Long-Term Planning
To be optimally prepared for the future, you should work within a solidly constructed long-term financial plan. If you would like to discuss your future with a licensed professional, contact us through this page to set up a free consultation: Hartford CT Retirement Planning Attorneys.