In the United States, it seems as though we start thinking about retirement shortly after we join the workforce. The reason for this is clear enough – we want to make sure we have sufficient income and resources to live comfortably during our retirement years. Regardless of where you are at in your life, there is one question you should be contemplating – Will Social Security retirement benefits be enough? As the Grand Forks elder law attorneys from German Law Group explain, the answer to that question is a resounding “no” for the average person.
The Birth of the Social Security System
Social Security was established in 1935 by the Social Security Act. Prior to the establishment of the Social Security system, support for the elderly was undertaken primarily by families. The program is based on contributions workers make into the system. While you are employed, you pay into Social Security; you receive benefits later on when it’s your turn to retire. On your paycheck, the contributions will appear as the Federal Insurance Contributions Act (FICA) taxes. For several decades after the birth of the Social Security retirement system, many workers could realistically expect to live comfortably on the combined income from an employer-sponsored pension and their Social Security benefits. Today, however, that is no longer the case.
How Does the Social Security System Work?
Throughout your working years, you accumulate credits based on your earnings. In 2018, you get one credit for every $1,320 you earn, up to a limit of four credits per year. The amount you need to earn to acquire a credit increases slightly each year. Once a credit is earned it remains on your record forever. If you were born after 1929, you need 40 credits in order to receive Social Security retirement benefits. Therefore, you must work at least ten years over the course of your lifetime to be eligible for Social Security retirement benefits.
When Can I Start Receiving Benefits?
You can retire any time you want; however, the earliest you can start receiving payouts is age 62 and the latest is age 70. You may choose to begin anywhere in that eight-year span; however, many people choose to delay the start of their retirement benefits until they are older than 62 years old because the longer you wait to start getting payments the larger your monthly payments will be.
How Much Will I Receive in Social Security Retirement Benefits?
Your monthly benefit amount will depend on things such as the age at which you begin receiving benefits and your earnings during the time period prior to retirement. You can find out how much you have paid into date as well as get an estimate of what your benefit will be by navigating to the Social Security Administration’s website. In addition, the Social Security Administration (SSA) mails out a summary of your benefits each year, about three months before your birthday or you can request a statement at any time by calling the SSA (800-772-1213) and asking for a form SSA-7004 or by downloading the form from the SSA website. Your statement provides a record of your earnings history, the number of credits you’ve accumulated to date, and an estimate of the retirement benefits available if you wait until full retirement age.
There is a maximum retirement benefit amount that changes each year. For 2018, the maximum Social Security retirement benefit amount is $2,788. To be eligible for the maximum benefit amount, however, you would have had to earn the maximum taxable earnings amount for at least 35 years. Contrasting the maximum benefit amount with the average monthly benefit for “all retired workers” in 2018 of $1,404 and it becomes clear that most people will not be able to live comfortably on just their Social Security retirement benefits alone. To ensure that you have sufficient income and resources when you reach retirement age you should incorporate retirement planning into your comprehensive estate plan as early in your working career as possible.
Contact a Grand Forks Elder Law Attorney
Please join us for an upcoming FREE seminar. If you have additional questions or concerns regarding your Social Security retirement benefits, or any other elder law issue, contact the Grand Forks elder law attorneys at German Law Group by calling 701-738-0060 to schedule an appointment.