Despite what you may hear reported on the news, the Social Security system is not in danger of going bankrupt. The government recognizes the importance of this program, and they know that without it millions of people will be left in dire financial condition.
Under the current tax system, the amount of benefits paid will exceed incoming revenue beginning in 2016. If no changes are made than the entire trust fund will exhausted by 2033. This fact is concerning, but realize that it is very unlikely the government will wait for this happen.
The most probable change we’ll see is an increase in the Social Security tax on wages. There will also continue to be adjustments to the calculation of full retirement age – meaning retirees will have to wait longer to collect full benefits. Some experts predict that benefits will be reduced in the future to keep the system afloat, but in my opinion this will be a tough sell to Americans who have paid into Social Security their whole lives.
When should I file my application for Social Security retirement?
Most folks know that applying for early retirement costs them in the long run with benefit reductions. Waiting until your full retirement age (FRA) or later is ideal if you can afford to wait that long. But not everyone has this luxury, which is why it is hard to answer the questions of “when” for everyone. Keep in mind that no matter what you do, you must be 65 years to qualify for Medicare. Thus, if you have health insurance tied to your employer than it is wise to keep that relationship alive for as long as possible.
How much will I get from my social security retirement checks?
This is another question where the answer depends on your personal life history. Things like how much you earned in your lifetime, your marital status, and age all come into play with this calculation. The short explanation is your top 35 years of earnings averaged out and indexed for inflation. This figure is reduced by about 25% if you take benefits early or increased by 8% for each year after FRA.
Now if you never worked but are married you are entitled to benefits based on your spouses earnings record. Under this scenario your benefits equal 50% of their monthly benefits. This also includes options for early retirement if needed.
Will my Social Security benefits be enough to survive in retirement?
Most people will not earn enough through Social Security to pay all of their bills. If you are accustomed to bringing home $3000 per month then expect Social Security to cover about 40% of that, or $1200 per month. The system is not designed to replace the income you were making while working full-time. However, a good employee retirement package combined with Social Security could conceivably bring you close to your former monthly income. And remember, your income tax will decrease since you will be earning substantially less.
What is the best way to maximize my retirement benefits?
The most important step is to plan ahead. My Social Security book gives you several different options to consider before applying. In addition to retirement benefits, you should also look at your monthly bills and expenses. Minimize your costs as much as possible and get try to get rid of services you don’t use. It is often easier to cut back instead of looking for ways to increase revenue.