The government programs that are in place to assist senior citizens should not be overestimated. If you rely on these benefits as the centerpiece of your retirement plan, you may be sorely disappointed when you recognize that you will never be able to retire.
First, we should explain the eligibility requirements. When you work and pay your taxes, the FICA or self-employment tax that you pay goes toward future Medicare and Social Security eligibility. This is done through the accrual of retirement credits. During the current calendar year, you get one credit for every $1220 that you earn, and you can earn as many as four credits in a year. When you have a least 40 credits, you will qualify for these benefit programs for seniors.
The age of eligibility for Medicare is 65 for everyone under currently existing laws. Things are different with Social Security. The full eligibility age depends on the year of your birth, but it will be somewhere between 66 and 67.
Social Security payouts are quite modest when you look into the statistics, and you can dig into the facts if you visit the Social Security Administration website. In 2015, the average monthly benefit for a single Social Security recipient is just $1328, and the average for a couple is $2176.
If you were to make the maximum contributions during your 35 highest earning years, you would be entitled to the maximum benefit. At the present time, the maximum Social Security benefit for top earners is $2663 per month, which is not going to finance a lifestyle full travel, fine dining, and quality social activities.
Cost of Living Adjustment
Each year, the Social Security Administration looks at the rate of inflation to determine whether or not there will be a cost of living adjustment or COLA. At the end of last year, they announced a 1.7 percent cost-of-living increase for 2015, so many seniors were expecting a similar increase to their benefits.
Unfortunately, there will be no increase forthcoming. The Social Security Administration has announced that there has been little change to the consumer price index, so they are not going to approve a cost-of-living adjustment for 2016.
Retirement Planning Consultation
We should also point out the fact that there are out-of-pocket costs that go along with Medicare, and this is something that you should take into consideration. Plus, the program does not pay for long-term care at all.
When you combine these medical expenses with the limited nature of Social Security benefits, you can see why it is important to plan ahead in advance to set aside the resources that you will need to enjoy your elder years in comfort. If you would like to discuss your long-term financial goals with a licensed professional, our firm can help. We offer no obligation consultations, and you can send us a message through this link to set up an appointment: Hartford CT Retirement Planning Attorneys.