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Your Social Security Questions Answered

Retirement Planning

Social Security is a system designed to supplement income in retirement or for workers who are disabled. This system has been an integral part of American’s lives for 84 years. When President Franklin D. Roosevelt signed the Social Security Act into law, it changed the lives of many American workers.

FDR envisioned this legislation to help support American workers. He felt that it was the duty of the government to lend support to the people who have been working to support this country all of their lives.

Even though the legislation has been in play for over 8 decades, many people don’t understand how it operates. I’d like to answer the most frequently asked questions about Social Security so that you can understand how it works and when it will benefit you.

What is Social Security?

Social Security is a financial benefit given to retired workers. The system is funded with federal tax dollars from the Federal Insurance Contribution Act or FICA taxes. These taxes are taken directly from your taxable earnings. Each paycheck, 12.4% of it gets funneled into Social Security. If you are employed with a company, your employer pays 6.2% and you pay 6.2%. If you work for yourself, however, you are responsible for the entire 12.4%.

This may seem like a lot of money, and it is. For example, if each paycheck you receive is $2,000, Social Security taxes will take about $250 with half being paid by you and the other half paid by your employer. The idea was that you contribute to Social Security through FICA when you are working so that you can collect from it when you are not working.

When people pay money to the federal government, they often wonder what it is being used for. The Social Security Administration reports that out of every tax dollar allocated for Social Security, 0.85 cents goes to paying benefits for retired people, their spouses, and families and the remaining 0.15 cents is distributed to people with disabilities and their families.

How can you draw your Social Security benefit?

Your eligibility for Social Security benefits rests on two factors: your work record and the age you enroll in the program. Every working American has a work record, or a document detailing your employment history. In order to get Social Security, you must gather a certain number of work credits during your time in the workforce.

For 2019, you will receive one credit for every $1,360 in earnings with a limit of 4 credits gained per year. Anyone born in 1929 or later must receive at least 40 credits or 10 years of work to qualify for retirement benefits.

Does that mean after 10 years you can leave your job and run for the hills? Well, not exactly.

Unless you become disabled, you will not be able to begin accepting Social Security benefits until you turn 62. If you do find yourself disabled, please note that you will need to go through a rigorous application process to receive benefits early. If you would like more information on this, please see the Social Security website.

You have three options for enrolling in your Social Security benefit: early, on time, or delayed. Each has its own benefits, so the most important thing is that you make the decision that is best for you.  

Electing to enroll early would mean you begin taking your benefit at the earliest possible age, 62. This works for many people because it allows them to get monthly checks longer which can help with budgeting and cash flow in retirement. But the downside is that your checks will be significantly lower. By enrolling early, your benefit will decrease by about 30% over the course of your retirement which is not a small number.

Another option is if you wait to enroll until your full retirement age, and for people born in 1960 or later that age is 67. Your full retirement age allows you to claim 100% of your benefit, making your monthly checks higher which could be a big help for your income.

The last option is to delay your claim until you turn 70. If you can claim your full benefit at 67 why wait 3 additional years? The reason is that your benefit will increase by 8% for every year you don’t enroll up to age 70. This means your benefit could increase by 24%!

When making the decision of when to claim it is important to evaluate your health and goals for retirement in order to make the best choice for you.

How can you calculate your Social Security benefit?

Now that you know what Social Security is and when you can start claiming benefits, it’s time to know how much that benefit will be.

Remember, your overall benefit will be determined by your work record and the age you enroll. In order to get specific numbers, the Social Security Administration has created a benefits calculator that helps you determine:

  • Your retirement age

  • Your estimated benefits whether you enroll early, on time, or delayed

  • Your spousal benefits should that apply

  • Your earnings benefits if you still work part-time in retirement

This tool is extremely helpful for determining the exact number you can expect when you start collecting benefits. Preparing yourself is a great way to help create your retirement budget and assess your income streams.


Can you count on Social Security in the long-term?

In its original form, Social Security was thought to provide about 40% of retirement income. The remaining 60% would come from additional savings investments, annuities, and personal savings.

It is estimated that the Social Security fund will be depleted by 2034, meaning that many young workers will not be able to rely on the benefit to help them in retirement. I advise that people prepare about 80%-90% of their retirement savings through 401(k), IRA, pension, annuity, investments, and personal savings in order to prepare them for retirement leaving only a small percentage open for Social Security.

Social Security has been a strong system for many people, but its benefits are not as robust as they used to be. It can be tough to figure out how Social Security will fit into your retirement income. If you would like personalized advice, give us a call!