Social Security is a federal government program that provides monthly benefits to eligible Americans. Approximately 56 million Americans collected Social Security benefits in 2012. This group included disabled workers, widowers and their children, and families of deceased workers. However, Social Security benefits are not only for people in these categories. These benefits also provide a measure of economic security to retirees.
Established in 1935, Social Security provide a means for retired workers to receive income. Prior to the development of this program, workers were responsible for securing their own financial future after retirement, and if unable to save enough money, many were unable to retire. Social Security helped bridge the financial gap, allowing many elderly workers to leave the workforce.
Eligibility for Social Security benefits is based on your date of birth. As of 2013, workers can begin receiving benefits as early as age 62. If born in 1929 or later, they must have worked at least 10 years before they’re eligible for compensation. Social Security eligibility is based on a system of credits. Workers need a total of 40 credits to qualify, and they receive four credits for every 10 years.
While age 62 is the earliest you can receive Social Security, you can delay benefits until age 66 – which is full retirement age. There are financial benefits to delaying Social Security. If you receive Social Security beginning at age 62, you will receive a maximum of $1,230 a month. If you delay Social Security benefits until age 66, your maximum benefit increases to $2,366.
If you’re approaching age 62 and decide to collect Social Security, you do not have to quit your job. You can work and receive benefits at the same time. However, your monthly benefit is reduced until you reach full retirement age, at which time you can work and receive full benefits.
Before you decide to collect Social Security benefits, refer to a Social Security calculator. A calculator estimates your retirement income based on your birthday and your earnings history. For every year that you delay collecting Social Security, your benefit increases by 7% up until the age of 70.
You can apply for Social Security benefits online, or by visiting your local Social Security Administration office. Plan accordingly and apply ahead of retirement. It can take up to three months to receive your first payment.
Because Social Security is a pay-as-you-go program, current Social Security benefits are funded by current taxpayer dollars. This is how the program works. However, as the ratio of present workers to present retirees decreases, and as people live longer, there are concerns as to whether Social Security will last into the future. These concerns are valid and some financial analysts fear an inevitable depletion of the Social Security program. What can you do to protect yourself in retirement?
If you question whether the program will be in place when you’re ready to retire, take steps now to secure your financial future. Think of Social Security as a means to supplement your income during retirement years, and not a primary source of income. To create other income streams, participate in an employee-sponsored retirement plan, and diversify with other investments, such as savings accounts, IRAs, certificates of deposits, real estate, stocks and bonds.