Social Security, first instituted by the U.S. federal government in 1935 and administered by the Social Security Administration (SSA), has been a mainstay in most Americans’ retirement plans ever since; even though social this is often not sufficient to provide the sum total of an individual’s retirement income needs. Most Americans pay into the system throughout their working lives, and it’s worth making sure you get back the retirement income that’s rightfully yours.
To be eligible to receive Social benefits, you must accumulate what are referred to as “social security credits,” by earning wages and paying payroll taxes out of those wages. You must accumulate a total of forty security credits to be eligible for benefits; people born before 1929 require even fewer credits. You can accumulate as many as four credits each year, by earning (in 2011) $1,120 in real wages to get one credit. So if you earn at least $4,480 in a given year, you will accumulate all four credits for that year. (Credit accumulation used to be on a quarterly basis — i.e., you would have to earn $1,120 in each three-month period throughout the course of the year — but now, under a revised formula, you could earn $4,480 in a single month and take the other eleven months off, and still accumulate the maximum number of credits for the year.)application filing service.
So, working for ten years is sufficient for most people to become eligible to receive social security benefits.
The total amount of your monthly benefit check will be based on your lifetime earnings, calculated via a standard formula devised by the SSA. The more you earned, the more you will be eligible to receive in benefits, up to a maximum amount that is adjusted annually. A sixty-six-year-old who retires in 2011, for instance, will be eligible for a maximum of $2,366 in monthly payments from Social Security. The SSA’s website provides calculators that allow you to figure out what your payment is likely to be. This maximum figure is not going to replace working income for the majority of wage earners, but it might be a substantial percentage of working income for many.
The earliest age at which you can begin collecting benefits is age sixty-two. However, this is not considered full retirement age by the SSA, and if you elect to begin collecting benefits at this age, your monthly checks will be reduced from the amount to which you would otherwise be entitled, by roughly 20 percent. Full retirement age — the age at which you can receive full benefits — varies according to date and year of birth, but it ranges from sixty-five to sixty-seven. You may also elect to delay receiving Social Security benefits until age seventy, and then your checks will be greater than full benefits, via a calculation based on several factors. There is no advantage whatsoever in delaying your benefits beyond age seventy.
You will need to carefully determine when would be most advantageous to begin receiving your benefits. If you have sufficient income from other sources and are in good health, it may be worthwhile waiting, receiving the biggest possible checks from age seventy on. However, if your means are limited, it may make more sense to draw those eight extra years’ worth of checks, even if each check is not as big.