As a working American, we all contribute to Social Security however most of us don’t truly understand what that means. Peter Lawrence of Hauppauge, NY understands Social Security retirement benefits and can break down what we can expect.
At its essence, Social Security is an insurance program for Americans that is required under federal law. Although death and disability benefits are available, Peter Lawrence of Hauppauge, NY indicates that retirement benefits are the most far-reaching of the three prongs of the program.
More than 68 million Americans receive Social Security benefits and more than 80% of beneficiaries were 62 or older. This includes 26% who are aged 75-84 and another 9% who are aged 85 or older. Peter Lawrence of Hauppauge, NY further reveals that for seniors over 65 years of age, Social Security income accounts for more than 50% of their household income.
It is important to understand how an American becomes eligible for Social Security retirement benefits. This mandatory participation is taken out of the paychecks of most working individuals. To receive retirement benefits, individuals must have worked and contributed to Social Security for 10 years or more. Individuals can earn up to four credits per year and need 40 credits to qualify for retirement benefits. Peter Lawrence of Hauppauge, NY clarifies that the actual monthly benefit amount depends on the retiree’s earnings record and the age at which they decide to start drawing benefits.
Eligible retirees can begin receiving their benefits at their “full retirement age” or FRA. FRA is between 66 and 67 years of age depending on birth year. For individuals born in 1955, FRA is 66 years and two months. FRA gradually increases to age 67 for individuals born in 1960 or later. Peter Lawrence of Hauppauge, NY shares that it is also possible to receive a reduced amount beginning at 62 years of age.
Initiating retirement benefits is not a difficult process. Individuals can apply for retirement benefits online, by phone at 800-772-1213, or in person. The Social Security website has an office locator based on zip code.
Peter Lawrence of Hauppauge, NY also offers some insight into how the amount of the retirement benefit is calculated. Pete explains that throughout an individual’s working life, a tax of 6.2% has been withheld from earnings to fund Social Security. This tax is indicated as “FICA” on your paystub. Your FICA contribution is taken on all income up to the “maximum taxable income”, an amount which is defined by Social Security each year.
Pete explains that the amount of your Social Security retirement benefit is calculated based on your 35 highest-earning years. For example, for an individual earning the highest taxable income for at least 35 years, the monthly benefit in 2024 is $3,822. However, the average monthly retirement benefit across all Americans is only $1,869.77.
American retirees can begin receiving their retirement benefits while working. According to Peter Lawrence of Hauppauge, NY, although the monthly benefit will be less than the full retirement benefit, the money is gradually recovered when full retirement is reached. The individuals who delay receiving retirement benefits ultimately receive more money. For every year an individual does not collect their benefit after attaining full retirement age, Social Security increases the benefit by 8 percent until age 70, however, there is no financial incentive to delay past age 70.
Peter Lawrence of Hauppauge, NY offers clarity on Americans who are divorced. He explains that Social Security will pay the higher of an individual’s retirement benefit or up to 50% of a divorced spouse’s benefit. To be eligible for up to 50% of the divorced spouse’s benefit, the marriage must have lasted at least 10 years, the individual must be at least 62 years old, and the individual cannot be remarried.
Finally, Peter Lawrence of Hauppauge, NY sheds some light on the on-going rumors that Social Security will go bankrupt in the near future. He shares that for the past two years, the Social Security Board of Trustees has estimated that reserves in the retirement fund will become depleted in 2033. After 2033, projections indicate that the tax revenue will only be enough to pay 79% of earned benefits. This shortfall is the result of more people collecting benefits and less people contributing to the fund. It is expected that Congress will institute new policies to correct this imbalance before the benefit to individual Americans is affected. These changes will likely be seen as higher taxes on workers, lower benefits and/or higher age requirements for retirees.
