Learn These Basic Facts About Social Security

One day, Social Security will comprise part of your retirement income. That’s the way it works for most of us, and yet a lot of people still don’t know much about the system. No one is saying you should memorize every rule and regulation; the system is too large and complicated for that! But everyone should know at least these basic facts about Social Security.

Your money is not set aside in a special account. Through the years, you pay Social Security taxes, which might lead you to believe that this money is set aside in a special retirement account with your name on it. In reality, that isn’t how it works. Taxes paid into the system today are used to pay for benefits today. When you retire and claim your benefits, you will be supported by future workers’ taxes.

Social Security is not “going under”. No matter how many dire news reports you hear, the entire Social Security system is not about to collapse. Right now, because incoming taxes don’t cover all benefits being paid out, the extra needed funds are taken from the Social Security Trust Fun. But since that fund will run out of money around 2030-2035, we need to find some other way to cover the deficit. At the current rate of income taxes and outgoing benefits, we will be able to pay about 2/3 of benefits checks. So we will either cut benefits or raise taxes to cover the balance, but Social Security is not going anywhere.

Don’t count upon the average benefit. Retirement blogs quote a lot of statistics, such as the average Social Security benefit. Keep in mind that this number is just an average. Your benefits might amount to more or less than this average, according to your work history. Currently the average benefit is $1,341, but the actual range is from $700 to $1,800.

Your monthly check amount might change. If you have your Medicare premiums deducted from your Social Security checks, you might actually receive less in some years due to rising premiums. And of course, in many years Social Security issues a cost of living adjustment (COLA) which can adjust checks upward to account for inflation.

You can claim your benefits before you retire. You can claim your benefits early, at age 62, if you don’t mind a permanently reduce check (by about 25 percent). On top of that, your benefits could be reduced if you earn more than a certain amount. If you’re still working at full retirement age, you can claim your full benefits and your checks will not be reduced no matter how much you earn through work.

If you die, your spouse can claim your benefits. If your benefits are higher than your surviving spouse’s benefit, they can claim your check instead. However, the check might be reduced somewhat if they are between age 60 and their full retirement age when they claim benefits.

Social Security benefits is not tax-free income. According to your income bracket, you might owe taxes on up to 85 percent of your benefits.

There is much more you should know about the Social Security system as you plan for retirement, but the above facts should have straightened out some common misconceptions for you. For more information about retirement planning, or to learn how to maximize your Social Security benefits, call our office to schedule an appointment.

This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.