Millions of US seniors depend on Social Security for a critical source of income after retirement. Whether you are looking to qualify for benefits or just want to plan for the future, there are five important rules about Social Security for you to learn.
1. Your benefits are calculated on the basis of income for 35 years of operation
The amount of pension is determined by your work history - 35 years of highest earnings will be taken into account - so the more you earn at the peak of your career, the more you will get as you get older, says Fool.com. But if you have not worked for full 35 years (for example, you have been working with children or taking care of a sick family member), you shouldn’t retire for a while to increase financial advantages.
Imagine a situation: you officially worked only 32 of the year. This means that in the table for calculating the pension you will have three zeros. But if you replace these zeros of dollars with your actual salary, the total amount of the pension will increase. The same is true if you now earn much more than before. Replacing a three-year salary of 20 000 US dollars with a three-year income of 120 000 dollars can increase the total amount of your pension, resulting in a higher income.
2. The earliest age to qualify for retirement is 62 of the year.
The eight-year window for applying for welfare benefits opens at age 62. This is the most popular age for applying for benefits, despite the fact that it has one important disadvantage - the reduction in monthly payments. Social Security benefits are calculated based on your income record. But you are eligible to receive full monthly benefits when you reach the so-called full retirement age or FRA. FRA depends on your year of birth, namely:
Thus, applying for a pension in 62 will result in the maximum possible reduction of the amount. For example, if by year of birth you are supposed to retire in 67 years, by doing this in 62 years, you will receive 30% less (!).
3. You will not win anything if you postpone receiving a pension until 70 years
Yes, early retirement will certainly affect the amount downward, but late retirement cannot be said that you can win anything. The monthly income incentive ends at 70. You will lose 30% if you retire early and gain 32% if your age on the table is 66 and you apply at 70. But no more.
4. You can receive social benefits even if you did not work
Because social security benefits are based on income, you can assume that people who have never worked will not receive anything. But in fact, social security is designed for the spouses of those who have worked all their lives and contributed money to the system. Therefore, as soon as your spouse applies for his allowance, you can receive up to 50% of his monthly payments.
In addition, you can still receive your spouse's benefits even if you have your own seniority. Social Security will pay either your monthly pension or half of your spouse's pension, whichever is the greater. This means that if you are eligible for $ 750 a month of your own pension, but your spouse receives $ 1800 a month, you will receive $ 900.
On the subject: What is the difference between our pensioners and foreign women?
5. Social Security was not created as a single source of income.
Although a pension can be the main source of income for the elderly, it has never been intended for the survival of a person alone. Most pensioners need 70-80% of their pre-retirement income to pay bills, while pension assistance will replace only 40% of the average income of a working person. This means that pension payments will not replace personal savings or additional sources of income.
The more you know about social security, the more chances you have to retire at the most appropriate age for this and make the most of your advantages. Even if there are several decades left until retirement, having studied the question in advance, you will find yourself in the most advantageous position.