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What You Need to know about Social Security Retirement Benefits

For most people, Social Security is a crucial part of retirement planning. Social Security is also a topic we don’t typically begin to take seriously until we approach the end of our careers and can see our retirement looming. However, the earlier we learn about the Social Security system, the earlier we can see how it fits into our retirement planning. Following are five basic facts you should know about Social Security before you retire.


1. To receive full retirement benefits from the Social Security Administration (SSA), you need to work until your Full Retirement Age (FRA).

For those of us born after 1959, full retirement age is 67. If you were born prior to 1960, your full retirement age is reduced two months for each year before 1960.

For example; if you were born in 1955, your birth year is 5 years earlier than 1960 and you can retire at age 66 and 2 months.

2. You can receive Social Security retirement benefits as early as age 62. However, your benefits will be permanently reduced if you begin to receive payments before you reach FRA.

It’s a choice that you need to make. Retire earlier and get smaller Social Security payments or wait until you reach your FRA and get the maximum amount. If you have reason to believe that you will live many years after you retire or that you might outlive your other sources of retirement income, you might want to wait until you reach FRA before applying for Social Security payments.

3. The amount of your Social Security retirement payment is based upon your 35 highest earning years.
The Social Security Administration tracks the earning information reported on your W2 each year and uses the information to determine your monthly Social Security retirement payment. When the SSA calculates your earnings, your income is adjusted for inflation. If you didn’t work for 35 years, the SSA substitutes zero income for the missing years and your benefit payments will be lowered. This is one important reason why you should check your W2 every year for accuracy and that you should put in the full 35 years of work before you retire.

The Social Security Administration will take the income from those 35 top earning years and place it into a formula that is intended to level the playing field a little between high and low income earners. The result is your monthly Social Security retirement payment.

You can use this Social Security benefit calculator to estimate your monthly retirement payment.

4. You can’t receive retirement benefits from the SSA until you have earned 40 social security credits.
What is a Social Security credit? How do you get them? Each year that you work, you will receive credits based upon the amount of money that you earn, up to a maximum of 4 credits per year. In 2013, you will earn one credit for every $1,160 that you earn, up to 4 credits. The amount of earnings required to earn a Social Security credit increases each year by a small amount.

If the gears in your head are turning right now, you will probably have figured out that you can earn 40 credits in as little as ten years. Don’t get too excited and start dreaming of retiring early. You still have to reach a minimum of age 62 to receive Social Security payments and that 35 years’ worth of income are used to calculate the amount of your monthly payment.

5. If you have any questions about Social Security benefits, the SSA has a very informative website that is easy to navigate and can answer all of your questions.

Visit the Social Security Administration website and take a look at all of the great information that is available about your Social Security benefits. The information doesn’t end at retirement benefits. You can learn about survivor and disability benefits and Medicare as well. Want to get the most out of the site? Sign up for an online account and you will be able to access your earning history, estimated payments and more. Check it out

Remember, Social Security was never intended to be the sole source of income during your retirement years, and it will most likely not provide you with the same quality of life you’re used to while working. Make sure you’re saving for your future. 

For budgeting and money-saving tips, visit the tools section of our website.

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