When it comes to retirement, a significant portion of retiree’s income will derive from Social Security. The truth is it actually represents 35.3 percent of total income for the average retiree. In order to get the most out of Social Security, you must understand the basics and the rules to claim the highest amount of benefits.
How Much Social Security Will I Receive?
In 2019, the average monthly Social Security benefit rate is $1,461. If you want to find out what kind of benefits you can receive, sign up for a “My Social Security Account” on the Social Security Administration’s website.
If you have yet to receive benefits, you can access your Social Security statement in order to review future retirement estimates and your earnings to confirm the amount of Social Security and Medicare taxes you’ve paid already. Additionally, you can request a verification letter which states you’ve never received benefits or even a replacement Social Security card.
Social Security and Medicare are considered trust funds and the trustees release a report each year. In their 2018 annual report, they claim Social Security will have to cut benefits by 21 percent if lawmakers cannot find a solution for the trust funds to run dry by 2034. So, for now, Social Security can pay only 79 percent in promised benefits to retired and disabled beneficiaries.
For example, if you anticipate receiving $1,000 a month in Social Security benefits if you retire, under the current laws, you would only receive $790 each month or $210 less per month than expected. Essentially, this means that either eventual beneficiaries must pay higher taxes or Social Security needs to pay lower benefits or else Social Security benefits will be completely depleted. Furthermore, Congress could increase the payroll tax or the cap on earnings.
When Should I Claim Social Security Benefits?
Many people claim Social Security when they turn the eligible age of 62 years old. However, they often fail to consider strategies which can maximize their benefits.
It is important to understand the amount of benefits you collect is based on your “full retirement age” (FRA), which is the age at which an individual may first become eligible for retirement pay. If you were born in 1960 or later, your FRA is 67. If you were born between 1938 and 1959, your FRA ranges from 65 and two months to 66 and ten months. If you were born in 1937 or prior, your FRA is 65 years old.
If you decide to claim your benefits prior to reaching your FRA, they will be permanently reduced. For instance, if you were born in 1960 and you decide to claim your benefits when you turn 62 years old, your benefits will be reduced by 30 percent and your spouse’s benefits would be reduced by 35 percent.
On the other hand, Social Security retirement benefits increase by a specific percentage if you claim them after reaching your FRA. Remember, when you reach 70 years of age, the increase no longer applies if you decide to delay claiming benefits.
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