"Social Security & Retirement"

The Department of Labor says the average American will spend 20 years in retirement. So are you prepared? Experts estimate you will need at least 70% of your pre-retirement income to maintain your standard of living when you stop working. It's National Planning for Retirement Week (April 13 to 17) and SAVED BY THE BELL is delving into Social Security - the major source of income for most of the elderly. When should you collect Social Security to receive the maximum benefit? Is Social Security moving closer to bankruptcy? What's the best way to receive your benefit statements? SAVED BY THE BELL has valuable tips on how to incorporate Social Security into a successful retirement plan. 

 

$AVED BY THE NUMBERS:

REMEMBER THE TIME:

The Social Security Act was signed into law by President Franklin D. Roosevelt on August 14, 1935. On January 31, 1940, the first monthly retirement check was issued to Ida May Fuller in the amount of $22.54. During her lifetime she collected a total of $22,888.92 in Social Security benefits. How much can you expect to receive in your lifetime? It all depends on if you're married, when you retire and how much you've earned over a lifetime. The Urban Institute says a single man turning 65 in 2011 earning an average wage ($43,500 in 2011 dollars) will receive lifetime Social Security benefits of $266,000. A single woman with the same criteria will get lifetime benefits of $290,000. A two earner couple, turning 65 in 2011 with both earning an average wage, will receive lifetime Social Security benefits of $556,000.

 

PLEASE MR. POSTMAN:
Do you remember the paper Social Security benefit statements that used to be mailed out every year? The mailings fell victim to budget cuts, then made a partial comeback last fall. In September 2014, the Social Security Administration (SSA) began mailing out statements to workers approaching ages 25, 30, 35, 40, 45, 50, 55, 60 and over. The statements are now delivered three months prior to your birthday if you aren't receiving Social Security benefits and haven't enrolled in a "my Social Security" account. But you don't have to wait for the government to mail the statement to you! Sign up for an account online at http://www.ssa.gov/.  You can also find out how much you may receive in Social Security benefits with the SSA Retirement Estimator tool: http://www.ssa.gov/retire/estimator.html. The tool gives estimates based on your actual Social Security earnings. Keep in mind: these are just estimates. You won't be able to receive your actual benefit amount until you apply for Social Security.

JUST GOT PAID:

When you should you apply for Social Security and how to do you maximize your benefits? Here are some important ages and numbers to keep in mind:

 

62: The earliest you can start receiving Social Security retirement benefits is 62.  While you can start receiving benefits at 62, if you start at that age, your monthly benefit amount will be reduced.

 

65: The full retirement age is the age at which a person may first become entitled to full or unreduced benefits. If you were born in 1937 or earlier, the full retirement age is 65.

 

66:  If you were born between 1943 and 1954, the full retirement age is 66.

67: The retirement age for people born after 1960 and later is 67.

70: A person can receive his/her largest benefit by retiring at age 70.

So here's how it works out if your full retirement age is 67:

 
Applying at 62? Your monthly benefit amount is reduced by about 30%

Applying at 63? Your monthly benefit amount is reduced by about 25%
Applying at 64? Your monthly benefit amount is reduced by about 20%
Applying at 65? Your monthly benefit amount is reduced by about 13.3%
Applying at 66? Your monthly benefit amount is reduced by about 6.7%
Applying at 67? You receive 100% of the full benefit
Applying at 70? If you were born in 1943 or later, the SSA will add 8% a year to your benefit for each year you delay signing up for Social Security beyond your full retirement age. After 70, there is no additional benefit to waiting to sign up for Social Security.

GIVE ME THE REASON:

Is it better to sign up for Social Security early and receive a smaller amount or wait for a larger monthly payment that you may not receive as long? The decision is a personal one and depends on a number of factors:

What is your expected Social Security payment?
Your Social Security retirement benefit is based on how much you earned during your working career. According to 2013 data from the SSA, the average monthly benefit for retired workers was $1294. Keep in mind: the amount you receive when you first get benefits sets the base for the amount you will receive for the rest of your life. However, you do receive annual cost of living adjustments depending on your work history.

What are your current and future cash needs?
Figuring out your current and future cash needs can be challenging. A good financial planner can help you figure out what you need to do to reach your retirement goals. A number of companies also have online retirement calculators to help you crunch the numbers. About.com's "Money Over 55" reviewed several websites and listed the pros and cons of each one: http://moneyover55.about.com/od/howmuchtoretire/ig/Retirement-Calculator-Reviews/

Do you plan to work in retirement?
A 2014 study conducted by Merrill Lynch found that nearly half of today's retirees say they either have worked or plan to work during their retirement. Your earnings in (or after) the month you reach your full retirement age won’t reduce your Social Security benefits. Each extra year you work adds another year of earnings to your Social Security record. The SSA will reduce your benefits, however, if your earnings exceed certain limits for the months before you reach full retirement age.

Do you have other retirement sources?
The SSA says nine-out-of-ten individuals 65 and older receive social security benefits. Social Security replaces only about 40% pre-retirement income for the average worker, therefore having pensions, savings and investments are important. The Investment Company Institute says in 2012, about 52 million American workers were active 401(k) participants and there were about 515,000 401(k) plans. The Bureau of Labor Statistics about one-in-four workers currently covered by a traditional pension plan is in a multiemployer plan, established by a labor union and an industry or trade group to cover workers from two or more related employers. A survey by TIAA-CREF found 18% of Americans are currently contributing to an Individual Retirement Account (IRA) as a part of their retirement strategy.

How long may you need Social Security?
The Centers for Disease Control puts the average life expectancy at 78.8 years. However, the SSA says many of us will live much longer than the “average” retiree. The CDC says about one-in-three 65-year-olds today will live to age 90, and more than one-in-seven will live to age 95. So you may need Social Security longer than you think.
 
QUESTION OF U?
Most experts advise Americans to wait until their full retirement age to file for Social Security. But does it ever make sense to apply for retirement benefits early? The situations listed below may apply to you:

- Are you are in poor health? If you don't expect to live into your 80's and 90's, it doesn't make sense to wait to receive benefits. 

- The longer you wait to receive Social Security, the higher your benefit. But if you are out of a job or can't make ends meet, you can't afford to wait.

- Social Security provides an important retirement benefit for most Americans. But if you really don't need the money, then it doesn't matter if you apply earlier or later. 

- If you are married or divorced, waiting to collect your retirement benefit may be the wrong move.  If you are the low-earning spouse, it may be better to take your retirement benefit starting at age 62 and then switch to the spousal benefit you can collect on your current or ex-spouse’s account starting at your full retirement age.

JUDGMENT DAY:
Each year, the Trustees of the Social Security reports on the current and projected financial status of the program. A 2014 study found that Social Security will no longer be able to pay full benefits to retirees after 2033.  But this doesn't mean Social Security is going bankrupt. The Trustees says unless Congress acts, after 2033 your benefit amount will be reduced, but it won't be eliminated. The SSA would still have enough tax income to deliver three-quarters of scheduled benefits after the projected insolvency date.

 You've just been SAVED BY THE BELL!