Retirement! The mere word conjures fond thoughts in many of us who aren’t there yet but close enough to dream. Dream, that is, until thoughts of the money we need jolt us to reality.
When it comes to retirement finances, many of us not yet there treat Social Security as only a secondary piece of our retirement finances and are planning other strategies now to be ready when the time does finally arrive.
Some assume it won’t be there at all so all the money for their senior years will have to come from elsewhere.
Seniors Leaning Heavily on Social Security
Our senior loved ones, however, may not have realized that they would live longer than they could possibly afford.
Too many find that Social Security is not providing them with enough to live on without fear of an emergency or illness that could sap their small income. Some seniors are lucky enough to have a pension, some with pensions find that they are not producing as they thought and others who had some money set aside in their nest egg have spent it — or lost a chunk of it in the financial downturn.
That makes planning how and when to draw on Social Security a key.
When to apply for Social Security benefits and how to optimize what our senior loved ones can receive is important for us to know as caregivers so we can advise them to get as much money as possible to pay for retirement for the duration.
Social Security was set during the Presidency of Franklin Roosevelt as a social insurance for all citizens. A fundamental concept behind the program is that we all contribute to and share the risks and benefits.
There are currently 62 million people receiving benefits. Social Security is intended to be self-sustaining, with contributions by those who are working. There are three different types of Social Security benefits which are independent of each other: retirement, disability and survivor benefits.
Social Security Benefits
There’s a lot to know about Social Security benefits, enough to fill volumes. We are being general and not trying to address specific individual situations. If you have questions about a specific situation or need, you might want to contact the Social Security Administration or a local expert.
- The maximum benefit from Social Security will be obtained if your senior waits until their full retirement age (FRA), or even longer, to apply for these benefits. FRA is calculated based on your senior’s date of birth.
- Your senior’s benefits are based on the average of 35 years of employment and looks at the highest earning years. One must work for 10 years to be eligible. Employer contributions match the deductions from employee paychecks.
- Your senior will get a statement of their eligibility and earnings at FRA in the mail once they are 60 years and over. Prior to 60 years, the statement can be obtained from the SSA.
- A retiree’s decision to apply for benefits likely depends on their situation, their health and ability to meet current living expenses. The longer a person waits to take Social Security, the higher the lifetime benefit will be.
- Benefits can be received beginning at age 62 but the amount will be lower than waiting until FRA. If a person waits until age 70, the largest amount can be earned.
- Survivor benefits can be paid to widows or widowers unless they are remarried. A divorced person can claim benefits of ex-spouse if they were married 10 or more years and more than one ex-spouse can claim spousal benefits. The rate is determined based on when the working spouse elected to get benefits. You must have necessary information to apply, as the government will not provide spouse’s personal information to you.
- It is recommended that recipients apply 3 months before they plan to start receiving benefits. You must have a social security card, birth certificate, proof of citizenship, prior year tax form, and military service information for those serving before 1968.
- Your senior can file and suspend their benefits in order to prevent any reduction if they return to work after they have begun receiving their benefits.
- It is possible for others to claim benefits from your parents’ social security, such as dependent children or stepchildren younger than 19 and in school, dependent grandchildren or adopted children.
- Couples who both worked and qualified for benefits are not penalized if they choose to receive the benefits of both at once.
- Some of Social Security earnings may be taxable, however most are not taxed.
- If your senior returns to work, even part time, their benefits will be subject to a penalty and reduced based on their income from their job.
There are many worksheets available to calculate your senior’s full retirement age, benefits based on year of application, how to calculate any tax liability, and other calculations you might wish to make. AARP’s site has a worksheet we found helpful .
The Social Security Administration (SSA) encourages everyone to plan for retirement and wait as long as possible, hopefully FRA to begin collecting benefits. They also want to remind people to apply for Medicare when the reach age 65.
You can contact the SSA via phone at 1-800-772-1213 or via the internet at www.ssa.gov.