The Social Security program will probably be a very important source of income for you when you attain senior citizen status. In this blog post, we will provide you with some very useful information about the program.
First, we will look at the age of eligibility for Social Security coverage. In many cases, the government can make things more complicated than they probably should be, and this enters the picture when it comes to the eligibility age.
There is no one age of eligibility that applies to everyone. The eligibility date depends upon your year of birth. If you were born between 1943 and 1954, your age of eligibility for your full Social Security benefit is 66.
After 1954, the eligibility age goes up by two months each year. To explain by way of example, if you were born in 1955, you would become eligible for your full Social Security benefit two months after your 66th birthday. Someone who was born in 1956 would become eligible at the age of 66 years and four months.
This two months per year arrangement tops out in 1960 when the age of eligibility reaches 67. People who were born in 1960 and after become eligible for a full benefit at the age of 67 under currently existing laws.
However, you do not have to wait until you reach the full eligibility age. If you want to, you can submit your application for Social Security when you are as young as 62 years of age. However, there are some drawbacks that enter the picture if you go this route.
Your benefit would be reduced if you accept an early Social Security benefit. Once again, the exact amount of the reduction would depend upon your birth year, but it would be somewhere between 25 percent and 30 percent.
The reduced benefit is one significant drawback, but there is another. If you continue to work and earn income when you are receiving an early monthly Social Security benefit, there is a limit to the amount that you can earn before you would be penalized. During the 2016 calendar year, the limit is $15,720. You would be penalized by one dollar for every two dollars that you earn above this amount if you choose to take an early Social Security benefit.
Your top 35 earning years are used to determine how much you will receive from Social Security. The more you earned, the more you will receive when you start to draw a Social Security benefit, but there is a maximum.
In 2016, the maximum Social Security benefit is $2,639, but most people will receive significantly less. During the current calendar year, the average Social Security payout for an individual benefit recipient is $1,341.
As you can see, Social Security will help, but it is difficult to realize your retirement dreams if you depend on Social Security alone. This is why careful advance planning and long-term financial discipline are so very important.
We should point out the fact that you can choose to delay the submission of your application for Social Security benefits beyond your age of full retirement. If you do this, you accumulate delayed retirement credits that will increase the amount of your benefit.
The increase is approximately 8 percent for each year that you delay the submission of your application, but it maxes out at the age of 70. As a result, there is no reason to delay beyond this age.
If you would like to find out how much you can expect from Social Security, you can register your account on the Social Security website.
Everyone does not automatically get a Social Security payout when they reach a particular age. When you are earning income throughout your life, you pay FICA for self-employment taxes. This can seem like a nuisance, but there is a benefit. You earn retirement credits when you pay these taxes.
In 2016, you get one credit for every $1260 that you earn. You can accumulate a maximum of four credits in a calendar year, so you will get the four credits if you work for any length of time. Anyone who accumulates a total of at least 40 retirement credits will ultimately receive a Social Security benefit under currently existing laws.
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We have provided some general information in this brief blog post, but there is a lot more to understand if you want to be fully prepared for retirement as you craft a suitable legacy to leave to your loved ones.
Our firm offers free seminars, and you can learn a great deal if you attend one of these information sessions. To see the schedule, click this link: Free Elder Law & Estate Planning Seminars.