Social security is more than just a tax that is taken out of your paycheck each pay period. That money goes into a fund to help supplement your income when you retire. You can take retirement early or wait until what the government considers “full retirement age,” which, for most people, is 65.
However, waiting to retire will benefit you more regarding the amount of money you receive each month. You earn credit toward your social security benefits for every quarter you work. You can earn up credit towards social security for up to four quarters per year and reach the maximum number after 35 years of employment. Your social security benefits won’t automatically kick in, however. When you decide to retire, you will have to fill out an application. If you have met all the requirements regarding credits earned, you will get a monthly check. Here are some important things you need to know about your social security benefits.
Full Retirement Age Varies Slightly
If you were born before 1937, you would meet the full retirement age when you turn 65. After that, it gets a bit more complicated. If you were born between 1938 and 1942, you need to add two months each year to the 65 years. For example, if you were born in 1938, you need to be 65 years and two months to retire. By 1938, your full retirement age has gone up to 65 years and ten months. Anyone born 1943-1954 can retire at the age of 66 and then you start adding two months each year until you get to the year 1959. If you were born in 1960 or later, your full retirement age is 67 years old. You need to work until your full retirement age to be eligible for one hundred percent of your benefit amount.
Social Security Shouldn’t Be Your Only Income
Today, many people struggle to live on the amount of social security they get each month. However, when the government created the program, it was only meant to be a supplement to whatever money you had saved. For that reason, the determined amount you received will only equal about forty percent of what you averaged over the past 35 years of work.
You can calculate the social security benefits you will receive by taking the highest income years you worked during the past 35 and averaging the amounts. This is done by adding the amounts together and dividing them by 35. Even if some of those years you made nothing, that zero amount is added into the average. This yearly amount is then divided by twelve to get your monthly benefit amount. The monthly benefits are often increased slightly at the beginning of each year but the amount does not reflect the actual rise in living costs.
You May Owe Taxes
The government did not intend for social security benefits to be the only source of income for seniors. As a result, you may still owe taxes on the amount you receive. This is especially true if you work part-time to help add income. For individuals who earn $25,000 or more per year or couples who earn $32,000 a year, you will need to file federal taxes.
When this was first put into action, it only impacted only about ten percent of social security recipients. However, the government hasn’t updated the original ruling to account for inflation. This means that now approximately fifty percent of those who receive social security benefits will owe taxes at the end of the year. When you consider that your benefits were earned over the years, it may not seem fair. However, the original money was a tax and you did not pay taxes on it at the time.
Learn More With SeniorSmart
Getting your social security benefits can appear to be challenging, but it doesn’t have to be. At SeniorSmart, we strive to provide answers and guidance to seniors from all walks of life. To learn more about what you need to know about social security, contact our team today at 205.460.1124.