Wednesday, October 13, 2010

Somewhere Over the Rainbow...

Social Security and Retirement Benefits

Photo by Alan Larus

I have recently been exploring information on Social Security (SS) retirement benefits. Although I am years away from it questions about it have come up to me several times in the past few months and I did not have the answers so I decided to take a look and see what the future holds in this regard and to share it with you. The fact is, the answer is that I still don’t have the answer! But there are many options.

More specifically, the big question is whether to retire early at age 62 and what the consequences of that decision might be in regard to your benefits. In reality, most people are putting off their retirement in a bad economy, working simply to pay the bills, with little thought to something called early retirement. In fact, a large percentage of the American population has little or no private retirement savings. In 2008, 64% of Americans relied upon SS as their primary source of income and 33% relied upon SS as 90% of their income. In short, most Americans will depend to a large extent upon their Social Security benefits someday to make ends meet. For them, waiting until the end point age of 70 is inevitable, as they need to make as much money now as they can, because they have no savings to fall back on to tide them over and they will need the largest possible SS benefit they can receive to pay their bills. http://www.comcast.net/articles/news-national/20101011/US.Social.Security.No.COLA/

Still, if you were considering it, there are many variables which affect this decision and no clear cut answer. The wisest approach short of hiring a financial planner for a fee only basis to assess your situation is to venture into the SSA’s official site where you can actually input your scenario and get projections which will help you see how much you will get and base your decision on that information. What is clear is that your monthly benefit amount is reduced if you take early retirement. Conversely, it increases by certain percentages for each year that you delay retirement up to age 70. The benefit increase stops at age 70 even if you delay taking benefits, so there is no logical reason to delay beyond age 70. http://www.socialsecurity.gov/retire2/delayret.htm

Whether you are single or married makes a difference. Whether you think you might live a longer or a shorter life makes a difference. Whether you have any private retirement savings makes a difference. Whether you intend to continue to work past official retirement age makes a difference. Once you reach full retirement age there is no limit on your income. Prior to that, there is a limit on how much you can make while you receive early benefits with an offset being taken. For some in depth thoughts on these variables, take a look at this article. http://www.nytimes.com/2009/07/11/your-money/11retire.html?_r=1

The SSA maintains an elaborate site which provides information and advice about when to retire and what your benefit will be. To determine what is considered full retirement age for you, go to
http://www.socialsecurity.gov/retire2/agereduction.htm  where you will find a chart indicating the full retirement age by year of birth. For example, 65 is no longer full retirement age for everyone. Instead, it is extended in increments for those born after 1938 and is now up to 67 for those born 1960 and later. Still, there is a note on this page which advises:

Note: If you decide to delay your benefits until after age 65, you should still apply for Medicare benefits within three months of your 65th birthday. If you wait longer, your Medicare medical insurance (Part B) and prescription drug coverage (Part D) may cost you more money.

This is critical since the age for eligibility for Medicare has NOT changed and remains at 65 no matter year you were born. For information on Medicare go to www.medicare.gov

There are so many issues which can affect you when the time draws near, you need to research the issues and make a decision. http://www.socialsecurity.gov/retire2/otherthings.htm

If you are already there and are near retirement go here http://www.ssa.gov/retire2/near.htm

You can also call the SSA on their hotline, although you should be prepared for a long wait to talk to a representative. 1-800-772-1213. TTY users should call 1-800-325-0778. Here is a link to the SSA’s official site where you can find the answers to questions. http://www.nytimes.com/2009/07/16/your-money/16retire.html

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