Social Security: 5 Things Gen Z Should Know
It might be awhile before Gen Zers enter their retirement years, but it’s never too early to start learning about Social Security. The earlier Gen Zers understand how Social Security works, the more they will be able to benefit from this program. Here are five things Gen Zers should know about Social Security.
Gen Zers Might Want To Wait To Collect Social Security
What is Social Security? Mindy Yu, CIMA and director of investing at Betterment at Work, said Social Security is a common source of income for retirees. Gen Zers should start receiving Social Security benefits at age 62 as long as they, or their spouse, have made enough Social Security contributions throughout their career.
However, those that start collecting Social Security at 62 do not receive 100% of their benefits. (Although there can be exceptions, like disability, that may allow someone to collect benefits earlier.) Yu said some may suggest, depending on your unique personal circumstances, delaying receiving benefits.
If you delay benefits, what age is the “right” time for you to start claiming Social Security? Heather Winston — director, financial advice and planning with retirement and income solutions at Principal — said Gen Zers will receive full benefits if they retire at what Social Security calls your “full retirement age.”
“Your full retirement age is 66 or 67, or somewhere in between, depending on what year you were born,” said Winston.
In general, Winston said the longer you wait to claim, up until age 70, the bigger your benefit. Gen Zers that can wait to start claiming benefits may be able to better optimize their income.
You Can Calculate a Benefits Estimate
Curious about how much you might receive in Social Security benefits? Gen Zers can start calculating an estimation now.
Yu recommends using the Social Security Administration’s Retirement Estimator. This tool calculates an estimated benefit amount for you based on your actual Social Security earnings. Create a free and secure “my Social Security” account through the SSA to estimate future benefits, request a replacement Social Security card, check the status of an application and utilize even more personalized tools.
In addition to using the SSA’s Retirement Estimator, Yu said Gen Zers can learn more about Social Security through any financial wellness benefits provided by their employer including live financial advisors or through your retirement plan provider.
Winston also recommends working with a financial professional to help you understand your options for your unique situation and if you still have questions about Social Security.
“It’s important to remember that you shouldn’t think you need a certain income level or account balance to seek professional financial advice. If you are Gen Z, it can be helpful to work with a professional in order to set up good habits through your lifetime,” said Winston.
Each Year You Work Increases Your Social Security
This is Social Security advice that applies to millennials and Gen Zers. Social Security benefits are based on a general average of 35 years of your highest but not consecutive years of earning. If there are zeroes throughout that mix, or if you are out of the workforce for a few years, the average will decline and your Social Security retirement benefits will be dramatically less for the full span of your retirement years.
The good news is each year you work replaces a zero year. Staying in the workforce, or reentering it if you have been out for awhile, will ensure your retirement benefits go up.
Start Saving For Your Future Self
Life is rarely linear. Our priorities often change and have an impact on our goals. This is why the best financial habits, including saving, will help set Gen Z up for success.
Winston said time is on Gen Z’s side to begin saving for their future selves. Gen Zers can start saving now through multiple investment vehicles, including a 401(k) plan, IRA, brokerage and bank accounts, and with any amount of money for retirement.
“While it may be difficult to really envision life 40+ years from now, the power of time and compound interest can help grow even small amounts into tidy sums,” said Winston. “We encourage investors to save as much as they can, for as long as they can.”
Where Can I Learn More About Social Security?
Are there any credible and reliable resources where Gen Zers can learn more about Social Security? The answer is yes. One of the best spaces where you can learn more about Social Security and retirement benefits is by visiting the SSA’s retirement benefits portal.
Gen Zers may receive more information about how retirement benefits work, how to plan for retirement, deciding when to start retirement benefits and what else affects your retirement benefits. Find out more about how Social Security fits into your retirement plan through the SSA.
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