The Social Security retirement program has been a basic part of
American life since 1940. The program is the foundation of many
people’s retirement income. It’s unlike any other income because
you can’t outlive Social Security benefits and benefits won’t lose
their value.
The Social Security retirement program has been a basic part of American life since 1940. The program is the foundation of many people’s retirement income. It’s unlike any other income because you can’t outlive Social Security benefits and benefits won’t lose their value.
Most people understand the basics of Social Security, but many are surprised by one thing or another when they actually start receiving it. And it’s usually not a pleasant surprise.
Many believe the Social Security program will be unable to provide benefits for those who have contributed to it over the years. The fact is Social Security funds are solvent and they’re taking in more revenue annually than they need to pay out in benefits. According to AARP, Social Security will be able to pay 100 percent of promised benefits until 2042. At that point, incoming tax revenue could still cover more than 70 percent of promised benefits.
Although many people aren’t aware of this, Social Security can also provide benefits when someone retires, becomes disabled or dies. A spouse or children may receive benefits based upon the eligibility of the deceased person. Widows and widowers who collect survivor benefits can switch to their own retirement benefits as early as age 62.
Another fact that’s not widely known is some people have to pay federal income taxes on benefits. This usually happens only if you have other substantial income.
The following are five tips that will help you prepare for the largest source of retirement income:
1. Make sure you get full credit – As you read your statement, double-check the years you have worked. If you think there is a mistake, check your own records or contact a former employer for information.
2. Compare figures – Look at the amount of benefits you will receive at age 62 compared to your full retirement age. Consider these figures when you decide the age at which you would like to retire.
3. Know what you will receive – Understand that you don’t necessarily get out of Social Security what you put into it. The system places a percentage of your average lifetime earnings that were subject to Social Security tax. And ironically, the less you contribute to the system, the better the investment is and the greater the replacement percentage may be.
4. Don’t forget about Medicare – If you’re getting Social Security benefits when you turn 65, your Medicare Hospital Benefits start automatically. If you’re not getting benefits at that age, you should sign up for Medicare close to your 65th birthday.
5. Research – Visit the Social Security Administration Web site for publications and online resources to help you understand your benefits, how to apply for benefits and the history of the Social Security program. You can also apply for benefits online at http://www.ssa.gov.
Eric Heckman is president of Heckman Financial & Ins. Services. You can contact Eric at 297-9800.
