If you’re employed, you’re probably familiar with the concept of social security. But do you know how it started, or what it may mean for you? Let’s take a look!
What Is Social Security?
Social Security is a federal program that provides benefits to retired people, as well as those who are unemployed or disabled. The Social Security Act was signed into law by President Franklin D. Roosevelt in 1935. Originally intended to help with unemployment, it now mainly functions as a safety net for the disabled and retirees.
How Does Social Security Work?
Social Security is based on contributions that workers make into the system. While you’re employed, you pay in, and when the time comes for you to retire, you receive benefits. As long as you’ve worked for at least 10 years (if you were born after 1929), you are eligible for Social Security benefits. The earliest you can begin collecting Social Security retirement benefits is age 62, and the latest is age 70.
When Can I Collect Social Security Benefits?
Keeping in mind that age 62 is the absolute earliest you can claim Social Security retirement benefits, it certainly can be tempting to retire as soon as possible. However, you will have to take into account several factors, such as the fact that the benefits you can claim at this age are reduced. Since full retirement age is currently 66, taking your Social Security benefits at 62 can mean that you only receive about 75% of your monthly benefit.
Every year you can delay taking your benefit, that benefit increases. For example, at 66, you will get 100 percent of your monthly benefit. By delaying retirement until 67, you’ll get 108 percent of the monthly benefit, and that increases to 132 percent by delaying until age 70. Once you’ve reached 70, however, your monthly benefit stops increasing, even if you continue to delay.
Before you decide when to start collecting your social security benefits, you should consider the following:
Other Retirement Income: If you have other investments, these can impact your decision on when to take social security. Factors such as your rate of return on your other investments—and what additional income you can expect as a result—should be considered when deciding when to begin claiming your Social Security retirement benefits.
Survivor Benefits: Monthly survivor benefits are paid to widows/widowers, dependents, or minor children in the event that the primary Social Security beneficiary passes away (eligibility varies; always consult your financial planner).If you are receiving reduced benefits as a result of retiring early, keep in mind that you’re also reducing benefits for your spouse and/or dependents. Of course, adding in dependents and spouses can make your benefits more complicated, so be sure to check with your financial advisor to ensure you’re as informed as possible before making a decision.
Collecting Social Security While Working: It sounds counter-intuitive, but some people opt to have a part-time job after they retire. If you choose to do so, know that it could impact your Social Security retirement benefits. If you’re younger than full retirement age and earn more than $16,920* per year, some of your Social Security could be withheld. In other cases, it could mean that your payments could be taxed. As always, it is best to consult with your financial advisor before making retirement decisions.
Protecting What Matters Most in Your World
Social Security is a complex subject, but it’s not one you have to face alone. Whether you are ready to retire or just starting out, your Farm Bureau agent is there to help protect what matters most to you, no matter what your stage in life. From insuring your vehicle to leaving a legacy, talk to an agent to learn more about how Farm Bureau can help protect what matters most in your world.