For many retirees, social security is the difference between a comfortable retirement and a barely passing working life. Almost half of married beneficiaries claim at least 50% of their social security checks, according to the Social Security Board, and around 21% rely on at least 90% of their retirement benefits.
Despite the fact that social security is a crucial factor in the retirement provision of many beneficiaries, very few people understand how the program works. In fact, a whopping 91% of adults over the age of 50 years admit they do not know what factors contribute to how much they receive in terms of benefits, according to a Nationwide Retirement Institute survey.
You do not have to know in detail how your benefit amount will be calculated, but if you do not know exactly how the program works, it may potential problems lead road. There are certain social security myths that do not seem harmful at first glance, but a misunderstanding of these core factors can cause you to miss out on additional retirement income.
. 1 The age at which you assert claims does not affect how much you receive
You can claim social security benefits from the age of 62. This is the most commonly used age – approximately 48% of women and 42% of women men apply for benefits at the age of 62, according to a report from the Center for Pension Research at Boston College.
However, if you claim this prematurely, you will not receive the full amount you are theoretically entitled to. The only way to get that amount is to apply for your full retirement age (FRA), which is 66, 66 and a few months or 67 years old. If you apply for an earlier amount than your FRA, your benefits will be reduced by up to 30%.
If you are in the dark about your FRA and how this affects your benefits, you are not alone. According to the Nationwide Retirement Institute, two-thirds of adults over the age of 50 do not know when they are eligible for the full benefit, and 57% of respondents believe that they are eligible earlier than they actually are. Therefore, if you claim to your FRA that you receive the full amount you are entitled to, you may be surprised if your check is smaller than expected.
On the other hand, you can also get a boost in performance by waiting for benefits to be requested after your FRA. For each month you wait until your 70th birthday past your FRA, you will receive slightly higher checks – up to 32% more on your full amount if you have a FRA at the age of 66.
2. The social security program goes bankrupt
The health of the social security program is of great concern and concern that the system will run out of money in the relatively near future. This concern is widespread among workers. 77% of those who are not retired claim that they do not receive social security benefits when deciding to retire, according to a report by the Transamerica Center for Retirement Studies.
The program is on shaky ground, but not close to collapse. Right now, with baby boomers retiring in droves, more money flows from the system than benefits in the form of taxes. This means that, according to the Social Security Board's report of 2019, the Social Security program is expected to deplete its liquidity reserves by 2035.
However, this does not mean that benefits will be abolished. As long as workers continue to pay taxes, there will always be money that can be distributed as benefits. However, this may mean that benefits will have to be cut by 2035. The Social Security Agency estimates that tax revenues will only be sufficient for 75% of planned benefits.
Some pensioners worried about their future benefits may find it a good idea to make a claim as soon as possible before the bankruptcy of the program. However, it may be more appropriate to postpone benefits by a few years. If the benefits are cut in the future, these larger checks that you receive when you wait for your FRA to claim it can help fill the gap.
3. You must receive benefits when you retire
The use of social security and retirement benefits often go hand in hand, but need not necessarily be simultaneous. In fact, it is sometimes a good idea to seek benefits before or after you finish work.
If you decide to retire and then find that you do not have enough money to make ends meet, you can opt for a partial benefit. Temporary job, even after you start claiming benefits. Or if you're passionate about your career and do not want to stop working soon, you can still opt for benefits to earn extra income – even if you do not necessarily need it.
That's it You may be able to continue your work after you have requested benefits. However, if you have not yet reached your FRA, your benefits may be (temporarily) reduced depending on how much you earn. In the years leading up to your FRA, your benefits will be cut by $ 1 for every $ 2 you earn over the 2019 annual limit of $ 17,640. In the year you actually reach your FRA, your benefits will be reduced by $ 1 for every $ 3 you earn above another $ 46,920 limit. These discounts are not permanent. Once you have reached your FRA, your benefit amount will be adjusted to reflect the amount of money you have withheld from your previous checks. If you're waiting to claim, you may choose to retire before you make a claim Request for benefits. There are some cases where this makes sense. For example, if you expect to retire for several decades, you may want larger checks to determine when your personal savings are used up. And if you have a solid nest egg now, you may be able to retire without the help of social security benefits.
Social security can be a complex issue, but understanding some of the more basic concepts can make it easier to make the most of your benefits. In particular, if you rely on your benefits for much of your retirement income, learning as much as possible about how the system works can help you to maximize your money.