Social Security Role In Retirement Planning: All You Need To Know
September 13, 2022 (Investorideas.com Newswire) Social Security is an important part of retirement. In fact, it is the largest source of post-work years income, accounting for more than 90% of funds for about 23% of married pensioners. This alone is enough to make you consider social security planning as a part of your retirement strategy.
In this article, we will be looking at the importance of social security benefits and how you can qualify.
What Is Social Security?
This is a federal program created by Congress in 1935 to provide retirement and disability benefits to workers who meet certain eligibility criteria. Under federal law, the Social Security Administration (SSA) is responsible for administering the program and paying benefits to eligible beneficiaries.
More than 70 million Americans were receiving social security benefits as of July 2022.
How Social Security Works
Social Security provides a monthly benefit to workers who have paid into the system through payroll taxes throughout their careers. The money they earn is placed in a 'social security savings account' that they can draw on when they stop work or become disabled. This account is called a "trust fund," because it is trust money that has been placed in a safe location.
The size of your income is determined by your lifetime earnings and the age at which you stop working and start receiving benefits. A monthly average of your lifetime earnings is calculated based on the 35 years in which you made the most money, with inflation taken into account.
When you stop work, you will begin to receive monthly insurance payments. This amount can increase or decrease based on your age when you stop working.
What Are The Requirements To Qualify For Social Security?
You need to meet specific requirements to qualify for social security and retirement income. These requirements are:
- You need to be at least 62 years old.
- You must have worked for at least 10 years.
- You need to have earned a certain amount of credits (for most people, this is 40 credits).
- Current and ex-spouses are eligible (as long as you have been married for at least 10 years).
- Someone who is disabled or blind (disability benefit is one of the goals of social security).
Why Is Social Security So Important?
Social security's importance cannot be overemphasized. Not only is it one of the most popular government programs, 85% of Americans believe that it is more important than ever to provide pensioners with a steady income. This is according to a 2013 poll.
If you are wondering what role social security plays in employee retirement, it is a vital part of the safety net. It provides income to millions of pensioners and disabled workers. It also helps to pay for some of their out-of-pocket health care costs.
This program is particularly important for those with low incomes who have fewer opportunities to save and build a nest egg.
Social Security Retirement Options
There are three social security retirement options available.
You can retire early and start receiving your benefits. However, to do so, you must have at least 40 credits and are at least age 62. At least 40% of people take the early route.
Retiring early, however, means that you may lose some (between 25 to 30 percent) of your benefits than if you had waited till the full retirement age (FRA).
You automatically qualify for full benefits as soon as you reach your full retirement age, which is between 66 and 67 depending on your date of birth. However, even though you're entitled to "full" benefits when you reach full retirement age, there is a good reason to wait longer.
Some people are able to work beyond the full retirement age. The longer you wait to take your benefits from full retirement age to 70, the more benefits you will receive. You will receive an increase of 8% per year from the SSA.
Should you include social security in retirement planning? The obvious answer is yes.
While there are many options for building a nest egg including traditional pensions, solo 401k plans, IRA plans, investments, and savings, social security retirement planning plays a vital role and is something you should pay attention to. This is where Interactive Wealth Advisors can help.
As one of the top agencies providing Portland fiduciary services, you can count on IWA to deliver a personalized service in the Oregon area that will help you make the most of the social security benefits system.
With a dedicated social security financial advisor by your side, you can guarantee a constant source of income to make your old age comfortable and economically stable.
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