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What Is the Social Security Act?
The Social Security Act, signed into law by President Franklin D. Roosevelt in 1935, is a cornerstone of the U.S. social safety net. This landmark legislation created a system of benefits for retired individuals, the jobless, and those with disabilities, while also providing aid to dependent mothers and children, victims of work-related accidents, and people with visual or physical impairments. Prior to this groundbreaking act, the federal government's involvement in such social welfare programs was minimal, primarily limited to pensions for veterans. Continue reading...
What Is Full Retirement Age (FRA) and How Does It Impact Your Social Security Benefits?
Navigating retirement? The Full Retirement Age (FRA) is a key term you need to grasp. Determining when you're eligible for full Social Security benefits, FRA has evolved with changing life expectancies. Claim too early, and you face reduced benefits; delay, and they grow. But with concerns about the Social Security Trust Fund's future and shifting retirement trends, understanding FRA is more crucial than ever. Whether you're eyeing early retirement or considering a delay, get the insights you need to make an informed decision and maximize your benefits. Dive into the world of FRA and prepare for a secure retirement. Continue reading...
What is FICA?
FICA (Federal Insurance Contributions Act) taxes are handled by the Social Security Administration, as they are payroll withholdings that go toward Social Security and Medicare funds. Most people will have half of their FICA paid by their employer, but self-employed people must pay it all on their own, which is called the “Self-Employment Tax.” FICA is a tax on employees and employers that funds the Social Security and Medicare programs of the United States. Continue reading...
How Does Social Security Work?
Social Security uses mandatory payroll taxes to grow trust funds that are used to pay income to retirees and other qualifying persons. Any surplus that is collected in a given year and not paid out is used to purchase Treasury Bonds, which pay a guaranteed rate of interest to the trusts and allows the government to use this surplus money in the meantime. When you receive your paycheck, you’ll see a deduction for FICA (Federal Insurance Contributions Act), which is a “combined payroll tax” for both Social Security and Medicare. Continue reading...
Am I Eligible for Social Security Benefits?
Social Security will pay benefits to those who have paid into the system, their beneficiaries in many cases, and also to some disabled individuals who have not paid into the system. In general, Social Security Benefits will only be paid in cases where individuals paid into the system. The exception is Supplemental Security Income (SSI), which is actually paid from the general tax revenue of the government, and not the actual Social Security trust funds, though it is administered by the Social Security Administration. Continue reading...
Can I Start Collecting My Social Security Benefits If I’m Still Working?
Yes, you can start receiving social security benefits before you actually stop working, and your benefit amount will not be affected if you have attained normal retirement age, or NRA, which is determined based on the year of your birth. NRA is 67 for most people today. If you start to take benefits while working and before the normal retirement age, your benefit will be reduced. But there are a few caveats to consider if you start to receive the benefits before your normal retirement age. Continue reading...
What Is a Chartered Retirement Planning Counselor (CRPC)?
A Chartered Retirement Planning Counselor (CRPC) is a prestigious professional designation awarded by the College for Financial Planning to individuals who have demonstrated their expertise in retirement planning. This designation signifies a high level of knowledge and proficiency in helping clients navigate the complex world of retirement finances. In this article, we will delve into what it takes to become a CRPC, the role these professionals play, and the benefits of earning this designation. Continue reading...
How Much Money Does the Government Have Invested in Social Security?
As of 2016, there is about $2.8 trillion in the Social Security Trust Funds, if you include what is owed to it by the Treasury for the bonds purchased with the surplus funds every year. The funds in the Trust are partitioned from the rest of the government budget, but the surplus year to year is invested in Treasury Bonds which effectively gives the government temporary use of the funds in exchange for a market-value interest rate. Continue reading...
What are the Projections for Social Security Benefits?
It looks like the Social Security Trust Funds may be depleted by 2037. The system can most likely continue while paying reduced benefits that come directly from the current social security taxes to the workforce. Estimates are that the Social Security Administration could pay about 70% of its obligations at that point. There is enough money to pay Social Security benefits at the current rate until about 2037. Continue reading...
When Will Social Security Go Bankrupt?
Most estimates project that the Social Security Trust Funds will be depleted by 2037. The system could still function at 70% of their full obligations by transferring cash flow directly from social security taxes to the retired beneficiaries, which most people don’t realize when they spread the news that the system is tanking. Adjustments to the system and interest rates could change how this plays out and keep it operating closer to full capacity. Continue reading...
Are Social Security Benefits Taxed?
Many people do not realize that their Social Security Benefits may be taxed. If you have a taxable income in retirement above a certain threshold, up to 85% of your social security benefits can be taxed. The calculation for the threshold income actually includes half of your social security benefits. Whether or not you trigger taxation on your benefits will depend on your “combined” income, which is a sum of your adjusted gross income (taxable income, which can include taxable sources such as qualified retirement plans), your nontaxable interest (from Muni bonds in particular, Roth IRAs are excludable), and half of your household Social Security benefits. Continue reading...
How Much Does (and Will) Social Security Pay?
Social Security uses a formula that applies a factor to your average monthly income from the 35 years in which you earned the most. The benefit will be calculated for your Normal Retirement Age (67 for most people today), and you should receive statements in the mail keeping you updated on your projected or actual Social Security Retirement Benefits. Every year, you should get a statement from the Social Security Administration that provides you with exact numbers. The amount depends on the age at which you retire, and the contributions you made to Social Security over the years. The formula uses the 35 years in which you earned the most, and divides it by the total number of months in 35 years, which is 420, which leads to your Average Indexed Monthly Earnings (AIME). Continue reading...
When Can I Start Receiving My Social Security Benefits?
You cannot claim your own social security benefit until you have reached age 62, and you have to start taking them by the time you reach age 70. You can actually start receiving benefits while you are still working, but your benefits will be reduced if you are younger than Normal Retirement Age. Currently, you have to be 62 years or older to start receiving Social Security benefits, and this includes spouses who wish to claim spousal benefits. You must start to receive benefits at age 70. Keep in mind that the longer you defer your benefits, the greater your Social Security payments will be (until age 70 of course). Continue reading...
How Does My Retirement Age Impact My Social Security Benefits?
Social Security benefits are calculated using the Normal Retirement Age (NRA), which is 67 for people born after 1960. If you take benefits early, your payment will be reduced by as much as 30% if taken at age 62. After NRA, your benefit will be increased by 8% for every year you defer benefits. You cannot defer taking Social Security past age 70. As a rule of thumb, the closer to age 70 you retire, the higher your Social Security benefits will be. Of course, there are some specific guidelines. Everyone has an NRA (Normal Retirement Age), which determines the age at which you can receive your full Social Security benefits. Continue reading...
What is the Best Age to Start Receiving Social Security Benefits?
Generally speaking, the closer you are to age 70, the better. But everyone will need to take all of their options into account and use some planning tools or the assistance of a professional planner to arrive at an ideal cash flow scenario for retirement. All assets should be brought into consideration, as well as the possible social security benefits of both spouses and their spousal benefits. There is no one “best age” to start receiving the Social Security benefits. Everyone has a Normal Retirement Age (NRA), which determines the age at which you can receive your “full” Social Security benefits, but you can defer your benefits past this point to receive an 8% increase for every additional year you deferred your benefit. Note that benefits cannot be deferred past age 70. Continue reading...
For How Long Will I Receive My Social Security Benefits?
After the payments begin, you'll receive Social Security benefits for the rest of your life. People worry that the Social Security system will run out of money, but as long as there are some workers paying into the system, it will be able to pay at least a reduced benefit to retirees. The system can be tweaked easily enough for full benefits to continue to all those to whom it is owed, barring some reductions for taxation on benefits and possible reductions based on income from other sources. After the payments begin, you’ll receive Social Security benefits for the rest of your life. It works like a pension. Continue reading...
Will My Spouse and Children Receive Social Security Benefits if I Die?
Spouses and children can and do receive social security benefits upon the death of a person who paid into the system. A spouse who is older than 60 will always be able to receive either a majority of the benefit that was (or would have been) paid to you, using their own age against the full benefit amount that was part of your benefit equation. Children, including dependent grandchildren, can receive a payment equal to 75% of your full benefit amount until they are about 18. Continue reading...
How are Social Security Benefits Computed?
Social Security retirement benefits are computed by finding the average monthly income of a worker during the highest-earning 35 years of employment, and then it plugs that amount into a formula for to determine their full benefit at Normal Retirement Age (NRA). A person may then choose to take benefits before or after NRA, with applicable reductions or additions. There are different equations for spousal benefits, survivor’s benefits, and maximum family benefits. Continue reading...
How Do I Know I’m Getting Credit for the Years I’ve Worked?
Create an online Social Security Account — Here For about a decade from 2000-2010, every worker in America would receive an annual statement in the mail. This fell subject to budget cuts, and today workers are encouraged to go online to view their social security information. Some workers receive mailings every 5 years to remind them if they have not signed up for the online statements. Starting in 1999, the Social Security Administration mailed 4-page annual statements to over 150 million workers. About 500,000 of these were delivered every day, at an annual cost of about $70 million. Budget costs eventually caused the statements to go paperless for a while, and as of 2016, workers who have not registered online will receive a letter every 5 years that contains a statement and information about how to register for the online statements. Continue reading...
What Kinds of Social Security Benefits Exist?
Social Security benefits are streams of income available for retired workers, their spouses, children and dependents, and survivors. It provides insurance against longevity, disability, and, to some extent, the death of the primary contributor. Social Security benefits are available to a worker and their dependents if the worker has triggered eligibility, which usually calculated as earning over $5,040 for 10 years, but is modified if the worker dies or is disabled at a young age. Benefits can be paid to multiple people within a household (and an ex-spouse) based on one worker’s contributions to the system, up to a Maximum Family Limit, which is somewhere between 150-180% of a worker’s full benefit amount. Continue reading...