Most people dream of the day that they can retire from their job. It’s a time when you no longer have to work and can spend as much time as you want with family and friends. For some, it seems like a long way off, and as a result, many people don’t really concern themselves with retirement and/or social security issues. But the fact of the matter is, if you’re a tax-paying citizen now, you’re actually paying for your social security benefits in the future, and it’s in your best interest to know what exactly you’re paying for.
What Are Social Security Benefits?
Social security was established in 1935 to help protect elderly individuals – or at least those over a certain age – who are no longer working. Today, it’s the largest source of income for older people over the age of 65. Essentially, the idea behind social security benefits is that they were created to replace at least a portion of your previous income, now that you can no longer work (or in some instances, your spouse has passed away, or you have been injured).
You can’t just receive social security benefits when you retire, in order to enjoy this income, you have to have paid at least a portion of your salary to the Social Security Trust/program during the time when you were working and had an income. While you’re working, if you’ve been taxed, you’ve actually been paying your way towards getting social security benefits later in life – on average, most paychecks withhold 6.2% of your earnings to go towards the Social Security fund.
Social security is not intended to be your only source of income. It is only supposed to replace a portion of the wage that you earned before you retired. The money you receive from social security benefits is only intended to be supplementary – around 40% of your average wages. As a result, it’s important that – before you retire – you begin to save money and invest in your future. That way, your social security benefits can add to the amount of money you have when you’re ready to retire.
How Old Do I Need to Be to Apply for Benefits?
Deciding when you need to apply for social security benefits can be confusing, partially because in recent years, the age at which you can start receiving your benefits has risen. Nowadays, most people reach “full retirement age” – or the age at which you can legally retire and start receiving your social security benefits between the ages of 66 and 67.
The exact age at which you can retire depends on the year you were born, and there are various tools online that can help you pinpoint when you will be eligible to start receiving benefits. That being said, it’s important to note that you can also delay retiring at your exact “full retirement age” in order to receive more money from your benefits farther down the road – which we will talk about below.
What Documents Do I Need to Apply for Benefits?
Before taking out your calculator and trying to do the math on how much you will receive when you retire from social security, it’s important to make sure that you have your affairs in order, so that applying for your benefits is as easy as humanly possible. If you have all your documents together that you need to apply, the faster you’ll start receiving that check, and most importantly, the quicker you can start enjoying your retirement!
It probably shouldn’t come as a surprise that to qualify for social security benefits, you obviously need your social security card. You will also need things like your original birth certificate, proof of your citizenship, and a copy of your W-2 form to prove that you’ve been working and paying taxes into the Social Security Fund.
Even if you don’t have all of this together, you can still sign up for social security. In many instances, your local social security offices will either allow you to provide the documents you are missing later, or they may even be able to help you find/get them. Regardless, it’s always best to come prepared!
How Much Will I Get with My Social Security Payments?
Now on to the fun stuff – how much will you be getting from your benefits payments? Unfortunately, there is no set answer: it just depends. If you’re a math whiz, there’s a formula that the Social Security Administration uses to figure out exactly how much you earned each year, adjusts that number for inflation, and averages everything (among a few other things).
If you don’t feel like taking out your calculator, we can tell you that on average, retirement benefits through social security are a little less than $1,500 a month, which adds up to around $17,000 a year. The more money you made, the more benefits you get.
It’s also important to keep in mind, as we said earlier, that when you retire will affect the amount you receive in benefits. If you retire right at your “full retirement age”, your benefit payments will be reduced. If, on the other hand, you have a job you like and you can wait until you’re 70, you can boost your monthly benefit payment by a significant amount.
How much you will make and how to file for social security benefits are often complex. As a result, it’s never a bad idea to consult with an attorney or financial planner, – said Social Security disability attorney Joseph Whitcomb with the Rocky Mountain Disability Law Group to see when you should file and what would help you out the most when you are ready to retire.
While social security benefits are not intended to supplement a full income, and keep you afloat after you stop working, they are an added benefit to retiring. Because of the effect that they can have on the latter portion of your life, whether you’re 25 or 65, it’s important to keep in mind how your career and paycheck will affect your social security benefits down the road.