Social Security Income

Social Security provides retirement income to individuals who have paid into the Social Security tax system. When planning retirement, it is important to also consider the value of Social Security income. Here’s everything you need to know about Social Security income.

How Does Social Security Income Work?

Social Security income is designed to replace a percentage of your pre-retirement income. The amount is calculated based on your lifetime earnings. The amount of your pre-retirement wages that gets replaced is based on your highest 35 years of earnings. This amount varies depending on how much you’ve earned and when you choose to start collecting benefits.

Who Can Collect Social Security Income?

Social Security benefits are administered to people who have retired, people who are disabled, survivors of workers who have died, and the dependants of Social Security beneficiaries. The money you pay into Social Security taxes isn’t held in a personal account. Instead, your taxes are used to pay people who currently receive benefits. Unused money goes to the Social Security trust fund.

Find Out If You’re Eligible

To be eligible for Social Security income, you must work and pay Social Security taxes. By doing so, you earn credits that go toward your Social Security benefits. In most cases, you’ll need 40 credits to be eligible for Social Security retirement benefits. This is the equivalent of 10 years of work.

How Much Social Security Income Will You Receive?

To find out how much you will receive from Social Security every month, you must find out the number of earnings being shown on your record. By checking this amount regularly, you can ensure that you are up to date on your earnings history. This will help you avoid surprises when it’s time for you to start collecting benefits.

When To Start Receiving Social Security Benefits

When it comes to collecting Social Security benefits, you have options on when to start. You can choose to collect at the full retirement age or the early retirement age. Some people even choose to delay retirement until after the full retirement age.

You can receive Social Security benefits as early as age 62. Though, doing so will reduce your benefits. Waiting until the full retirement age, 66 or 67, allows you to collect the full amount. If you decide to wait even longer, your retirement benefit will increase until you are age 70.

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Develop a Strategic Financial Plan

If you know how much income you will receive in retirement, you can plan more effectively for that period of your life. A financial planner can help you get started.