Retirement Benefits from Social Security
We want you to be aware of the implications of Social Security for you and your family’s financial future. This section explains how Social Security works, who is eligible for retirement payments, and what to consider before applying. Continue reading to find out how Social Security might help you plan for your retirement.
What Are Retirement Benefits and How Do They Work?
Social Security replaces a portion of your pre-retirement income based on your professional earnings. Social Security pays out a part of your pre-retirement earnings based on your top 35 years of earnings, which varies depending on how much you earn and when you choose to start receiving benefits.
You pay into the Social Security system while you work. Benefits are distributed to: • Disabled individuals; • Survivors of dead employees; and • Beneficiary’s dependents.
When you receive benefits, tax money is not kept in a personal account for you to use. Your taxes are used to pay those who are currently receiving benefits. Any money you don’t spend goes into the Social Security trust fund, which pays monthly benefits to you and your family after you reach retirement age.
How do you know when you qualify for Retirement Benefits?
When you work and pay Social Security taxes, you accumulate “credits” toward your benefits. Your birth year determines the number of credits required to earn retirement benefits. If you were born in 1929 or later, you’ll need 40 credits (usually, this is 10 years of work).
The credits will remain on your record if you stop working before accumulating enough credits to qualify for Social Security benefits. If you come back to work later, you might get more credits. You won’t be eligible for retirement benefits until you’ve earned 40 credits.
When can someone apply for retirement benefits?
Your monthly payments are determined by your age when you begin receiving your retirement benefits. There are three things to consider when selecting when to start receiving benefits. Full retirement age, early retirement age, and delayed retirement age are the three sections. When you reach full retirement age, you are eligible to begin collecting your full retirement benefits. If you were born between 1955 and 1960, you must be 66 years old to qualify. At the age of 67, if you were born in 1960 or later, you will be eligible for full retirement benefits. Being able to collect benefits as early as the age of 62 is known as early retirement age. The disadvantage is that you will not receive your full retirement benefits until you reach full retirement age. When you don’t claim your retirement benefits by the age of 67, it’s known as delayed retirement age. Until you reach the age of 70, your benefits will continue to rise.