Social Security retirement benefits are something that most Americans will be entitled to when they reach retirement age. For some, those benefits will represent their entire income once they reach their “Golden Years.” For others, Social Security benefits are just part of a complex retirement plan while still others are not counting on those benefits at all. No matter what role Social Security retirement benefits play in your overall retirement plan, you should have at least a basic understanding of how the Social Security system works to fund your retirement. To help you gain a basic understanding of the system, the elder law attorneys at the Law Offices of Kobrick & Moccia explain how the Social Security retirement benefits system works.
Social Security System Overview
Social Security was established in 1935 by the Social Security Act. Prior to the establishment of the Social Security system, support for the elderly was undertaken primarily by families. The program is based on contributions workers make into the system. While you are employed, you pay into Social Security; you receive benefits later on when it’s your turn to retire. On your paycheck, the contributions will appear as the Federal Insurance Contributions Act (FICA) taxes.
How Much Do I Have to Contribute to Be Entitled to Benefits When I Retire?
Throughout your working years, you accumulate credits based on your earnings. In 2018, you get one credit for every $1,320 you earn, up to a limit of four credits per year. The amount you need to earn to acquire a credit increases slightly each year. Once a credit is earned it remains on your record forever. If you were born after 1929, you need 40 credits in order to receive Social Security retirement benefits. Therefore, you must work at least ten years over the course of your lifetime to be eligible for Social Security retirement benefits.
When Can I Start Receiving Benefits?
You can retire any time you want; however, the earliest you can start receiving payouts is age 62 and the latest is age 70. You may choose to begin anywhere in that eight year span; however, many people choose to delay the start of their retirement benefits until they are older than 62 years old because the longer you wait to start getting payments the larger your monthly payments will be.
How Much Will My Monthly Benefit Amount Be?
The amount of your monthly benefit will depend on several factors. If you want to know now how much you have paid in to date and/or what your benefit will be, you can get an estimate at any time. The Social Security Administration (SSA) mails out a summary of your benefits each year, about three months before your birthday. In addition, you can request one 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’ve 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 Collecting My Benefits?
The government makes you wait until “full retirement age” in order to start collecting the full retirement payout that you’ve earned. Full retirement age used to be 65, but Congress voted in 1983 to raise it to 67 for everyone born in 1960 or later. For those workers born between 1938 and 1960, the full retirement age varies depending on the individual’s birth year. If you were born before 1960 and you want to know when you will reach your full retirement age you can check on the Social Security website’s online retirement planner.
To decide whether or not to delay your retirement you undoubtedly want to know what the difference in your monthly benefit will be if you wait versus retiring at age 62. Yet again, this depends on when you were born. For example, if you were born between 1943 and 1954, your payouts will be reduced 25 percent if you start receiving benefits at age 62 and they will remain at that reduced rate for the rest of your life so be sure to factor that in when making your decision to retire early. Conversely, your benefits payment goes up 8 percent for every year after full retirement age that you delay collecting payments, up to age 70. Nothing changes after that point so there is no benefit to delaying the collection of benefits beyond your 70th birthday.
Contact Elder Law Attorneys
Please feel free to download our FREE estate planning worksheet. If you have questions or concerns about Social Security retirement benefits, or any other elder law legal issues, contact the New York elder law attorneys at the Law Offices of Kobrick & Moccia by calling 800-295-1917 to schedule your appointment.