Retirement Planning

Understanding the Basics of Social Security Retirement Benefits

November 21, 2017

""As seen on the WJAR NBC 10 Smart Advice Series

Like millions of Americans, Social Security benefits may be a critical piece of funding your retirement. You should be aware that your choice of when to begin receiving your social security benefits will impact your benefits. If you are married, commencing your social security benefits early could also affect your spouse’s benefits. Here are some basic elements to the social security system that everyone should keep in mind when planning for retirement:

Social Security retirement benefits are based upon the earnings that your employer or a self-employed employee reports to the government. To be eligible for social security, you must have 40 quarters of wages subject to Social Security payroll taxes. The amount of your benefits are based on the average of the 35 highest years of earning.

When you reach your full retirement age, you are entitled to collect your full insurance amount. For people born before 1955, the full retirement age is 66. The full retirement ages increases by two month increments for individuals born each year between 1955 and 1960, and the full retirement age for all individuals born after 1960 is 67 years.

You may begin to collect Social Security benefits as early as age 62, but if you start to collect benefits before your full retirement age, your monthly payments will be reduced. For those who begin receiving benefits early, benefits are reduced based on the number of months of benefits received before you reach your full retirement age and what year you were born. The reduction will be 25% for people who reached age 62 in 2013 and 30% for people born after 1959. Your benefits could further change if you work after you start receiving benefits.

There are potential drawbacks if you start collecting social security while you are still working. If you begin receiving benefits early and continue working, some of your benefits may be withheld if you have excess earnings. If you wait until full retirement age, benefits will not be reduced. Delaying benefits until after full retirement age will result in your benefits being increased based on the number of months you do not receive benefits between full retirement age and age 70. There is no additional benefit increase after you reach age 70, even if you continue to delay taking benefits.

Financially speaking, your options for collecting Social Security or converting assets to an ongoing stream of income may influence your retirement planning. Couples should assess their options for collecting benefits. Deferring commencement of social security payments may increase the monthly benefit.

The Social Security Administration website has valuable information as well as retirement calculators that are quite useful. The link is provided here for your convenience:

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