Although the days of being able to completely depend on Social Security benefits to take care of you during your “Golden Years” are long gone, Social Security benefits may still play a central role in your retirement planning. As such, you are probably wondering “ How much will I get from Social Security when I retire?” Unfortunately, it is difficult to know with complete certainty what you will receive when you reach retirement age; however, it is possible to estimate your benefits. A better understanding of how Social Security works may help you incorporate your potential future benefits into your retirement plans.
The Social Security system works by using the income earned by people who are currently in the working years to fund retirees who have paid into the system throughout their working lives. Every year that you earn income you pay into the system through payment of “FICA” taxes. Those deductions pay into Social Security and Medicare and are then used to fund current retirees. The idea is that when you reach retirement age the current crop of workers will be paying into the system as well which will then fund your Social Security and Medicare benefits. The concerns about the future of Social Security are based on the fact that with the huge numbers of “Baby Boomers” heading into retirement now there may not be enough workers to fund their retirement, effectively resulting in a cash flow shortage at some point in time. Assuming that those concerns are alleviated, you need to know how your Social Security benefits will be calculated so you can plan accordingly.
Your benefits are all based on “work credits” earned over your lifetime. As of 2015, you earn one work credit for every $1220 in income you earn. You may earn a maximum of four work credits a year. You need 40 work credits before you are eligible for Social Security retirement benefits.
The amount you will receive in retirement benefits is based on your 35 highest earning years with a maximum monthly benefit cap of $2663 for an individual as of 2015. Assuming you take your retirement benefits at the standard age (currently around 66 or 67, depending on your year of birth) the average monthly benefit in 2015 is around $1330 for an individual and $2175 for a couple, assuming both parties are eligible for benefits. You can begin receiving benefits as early as age 62 or as late as age 70. If you elect to start benefits early you will receive a reduced monthly benefit amount whereas you will receive an increased monthly benefit of around eight percent for every year you delay your retirement up to age 70.
Although there are no aboslute guarantees with regard to future benefits, you can get an idea how much your Social Security retirement benefits will be using the “Social Security Retirement Estimator” tool found on the SSA website.
If you have additional questions or concerns about Social Security, retirement planning, or estate planning in general, contact the experienced New York estate planning attorneys at The Law Offices of Kobrick & Moccia by calling 800-295-1917 to schedule your appointment.