10 Things Americans Must Know About Retirement Benefits: Social Security retirement benefits are an essential aspect of financial planning for Americans. If you’ve just started working and are paying Social Security taxes, there are ten crucial things you need to know about these benefits.
1. Full Retirement Age (FRA)
Full Retirement Age (FRA) is the age at which you are eligible to receive 100% of your Social Security benefits. The FRA depends on the year you were born. For those born in 1960 or later, the FRA is 67. It’s essential to know your FRA to plan your retirement effectively.
2. Filing Early or Late
Filing for Social Security at different ages affects your benefit amount. If you file at 62, the earliest age possible, you will receive about 30% less than your full benefit. Conversely, if you wait until 70, your benefit increases by about 24%. Understanding these percentages can help you decide the best time to start receiving benefits based on your financial situation.
3. Work Credits
Not all American workers qualify for retirement benefits. You must have worked for at least ten years in jobs covered by the Social Security Administration (SSA) to receive monthly payments. This requirement translates to needing 40 work credits to qualify for retirement benefits at 62, the earliest filing age.
4. Maximum Benefit Amount
The maximum Social Security benefit for 2024 is $4,873 per month. While achieving this amount might be challenging, you can increase your benefit by working for 35 years, delaying your filing until age 70, and earning as much as possible while paying payroll taxes.
5. Cost-of-Living Adjustments (COLA)
Social Security benefits may receive annual Cost-of-Living Adjustments (COLA) to account for inflation. However, these increases might not always keep up with rising expenses. It’s wise to invest in other retirement accounts like IRA or 401(k) and save as much as possible to maintain your purchasing power.
6. Spousal Benefits
If your spouse is at least 62 years old, they may qualify for Social Security benefits based on your work record, even if they have never worked. Spousal benefits can provide significant additional income, so it’s crucial to check your spouse’s eligibility and consider the best time for both of you to apply.
7. Social Security Statement
Regularly review your Social Security Statement, which provides estimates of your retirement benefits at different ages. This statement also shows if your family can receive survivor benefits or if you qualify for Social Security Disability Insurance (SSDI). This information is vital for planning your financial future.
8. Working and Receiving Benefits
Working while receiving Social Security benefits before reaching FRA can reduce your benefit amount. The SSA may deduct $1 for every $2 you earn above the annual limit if you’re under FRA. Understanding how your earnings affect your benefits can help you make informed decisions about work and retirement.
9. Medicare Eligibility
Medicare eligibility is another crucial factor to consider before filing for Social Security. Generally, you’re eligible for Medicare at 65, but if you retire before then, you may need to secure alternative health insurance, which could be costly.
10. Supplemental Security Income (SSI) and SNAP Benefits
If you receive a low Social Security payment and have a low income, you might qualify for Supplemental Security Income (SSI) from the federal government and Supplemental Nutrition Assistance Program (SNAP) benefits from the USDA. These programs can provide additional financial support.
FAQs
What is Full Retirement Age (FRA) for Social Security benefits?
The FRA depends on your birth year. For those born in 1960 or later, the FRA is 67.
How does filing for Social Security at different ages affect my benefits?
Filing at 62 reduces benefits by about 30%, while filing at 70 increases benefits by about 24%.
How many work credits do I need to qualify for Social Security retirement benefits?
You need 40 work credits, equivalent to about ten years of work, to qualify for retirement benefits.
Can my spouse receive Social Security benefits based on my work record?
Yes, if your spouse is at least 62 years old, they may qualify for spousal benefits based on your work record.
What should I do if I receive a low Social Security payment?
If you have a low income, you may qualify for Supplemental Security Income (SSI) and Supplemental Nutrition Assistance Program (SNAP) benefits to supplement your income.
