Although counting entirely on Social Security retirement benefits to fund your retirement is no longer an option, most people are still counting on those benefits as part of their retirement income. If you are one of them, you need to be aware that the age at which you start accepting benefits will directly affect the amount you receive. To help you plan for your retirement, the Grand Forks retirement planning attorneys at German Law explain how your age at retirement impacts your Social Security benefits.
The Social Security Retirement System
The Social Security retirement program is based on contributions workers make to the system. While you are employed, you pay into Social Security, and then you receive benefits when you retire. On your paycheck, the contributions will appear as the Federal Insurance Contributions Act (FICA) taxes. Although it is no longer the case, for decades after the birth of the Social Security retirement system many workers could realistically expect to live comfortably during their “Golden Years” on the combined income from an employer-sponsored pension and their Social Security benefits.
How Do I Qualify for Social Security Retirement Benefits?
To qualify for Social Security Retirement benefits you accumulate credits that are based on your earnings over the course of your working years. The amount you need to earn to accumulate a credit has increased over the years to keep up with inflation. For example, for 2022, you received one credit for every $1,510 you earn, up to a limit of four credits per year. Once a credit is earned it remains on your record forever. If you were born after 1929, you need 40 credits to receive Social Security retirement benefits. Therefore, most people alive today must have worked at least ten years over the course of their lifetime to be eligible for Social Security retirement benefits.
What Will My Social Security Retirement Monthly Benefit Be?
If you want to know now how much you have paid to date and/or what your benefit will be, you can request an estimate at any time by calling the SSA (800-772-1213) and asking for a form SSA-7004, or you can download the form from the SSA website. Your statement provides a record of your earnings history, the number of credits you have accumulated to date and an estimate of the retirement benefits available if you wait until full retirement age. You also have the option to estimate your benefit amount yourself using the Retirement Estimator tool on the SSA website.
When Should I Start Accepting Social Security Benefits?
When you decide to retire and start collecting benefits has a significant impact on your monthly retirement benefit amount. The earliest you can start receiving payouts from Social Security Retirement is age 62 and the latest is age 70. You may choose to begin anywhere in that eight-year span; however, the longer you wait to start getting payments the larger your monthly payments will be. If you wish to receive your “full” retirement benefits you will need to wait until age 67 to start collecting benefits if you were born after 1960. If you were born between 1938 and 1960, full retirement age varies depending on what year you were born so you will need to check with the Social Security Administration.
Retiring early will cost you while waiting to collect your retirement benefits means a significant monthly increase. Social Security reduces the monthly payment by 5/9 of 1 percent for each month before full retirement age, up to 36 months, and 5/12 of 1 percent for each additional month. By way of example, if you were born in 1960, meaning you turned 62 in 2022, your retirement benefit amount would be reduced by 30 percent if you retire early at age 62. Conversely, your retirement benefit amount is increased by eight percent for every year you delay receiving benefits, up to age 70. For most people, that means your benefit amount could be increased by 24 percent by retiring at age 70 instead of age 67.
Contact a Grand Forks Retirement Planning Attorney
Please join us for an upcoming FREE seminar. If you have additional questions about retirement planning, contact a Grand Forks retirement planning attorney at German Law by calling 701-738-0060 to schedule an appointment.
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