Ever since the Social Security Act was signed into law by President Franklin Delano Roosevelt in the wake of the Great Depression, millions of Americans and their survivors have benefited from this social insurance program. Now that the United States has fully recovered from the Great Recession, which lasted from 2007 until about 2012, the impact, efficiency, and viability of social security have become important topics of public discussion. The reality of collecting social security in 2018 is that most Americans will rely on it in the future, which is why it’s important to learn a few things about this program.
1. Social Security Shouldn’t Be Considered a Full Retirement Program
Even in its early stages, social security wasn’t meant to be a comprehensive retirement solution. If you live in a low-income household, social security will probably cover half of your living expenses. For individuals living middle-class lives these days, social security payments will only cover about 40 percent of expenses. Instead of waiting to become eligible for social security, Americans need to strongly consider sitting down with an experienced retirement planner such as financial advisor Jan Gleisner to figure out how they should prepare for this milestone.
2. Social Security Must Be Earned
Unless you become disabled or are financially dependent on others, you must contribute to the program to access its benefits. Earning social security is a matter of producing at least 40 work credits, which, as of 2018, are estimated to be around $52,000 over a lifetime of employment. For example, an individual who earns minimum wage and works on a part-time basis will have to contribute for 10 years to become eligible.
3. Social Security Has Maximum Benefit Amounts
You can start receiving pension payments at the age of 62, but it’s in your best interest to continue working, earning, and waiting until you reach 67 if possible. The idea is to qualify for the maximum benefit amount by postponing your full retirement age. Delayed retirement credits are increased at a monthly rate from the age of 62 until you reach the age of 70, and the maximum annual rate of increase can be as high as 8 percent.
4. Social Security and Medicare Are Separate Programs
You don’t have to wait until your full retirement age to access Medicare. You can and should enroll when you turn 65. Medicare is designed to provide numerous healthcare benefits that would likely represent a substantial portion of your retirement income and assets.
5. Social Security Doesn’t Preclude Taxation
The tax liability of most Americans is reduced when they retire, but it doesn’t go away completely. A little more than 50 percent of retirees in the U.S. should expect to pay taxes on their social security benefits. Although taxes on these benefits aren’t excessive by any means, they shouldn’t be ignored.
Planning for retirement should start as early as possible, and factoring in social security payments is an important part of the process. For expert advice on any aspect of retirement planning, San Diego residents should contact Jan Gleisner, a retirement advisor with a wealth of experience helping clients maximize investments and manage their money with an eye toward economic security in their golden years. Call Jan Gleisner today at 858-337-2385 to schedule a consultation.