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Whether you’re a few years or a few decades away from retirement, you want to make sure you can live comfortably when you do retire. First enacted in the 1930s, America’s Social Security program protects people against the loss of earnings due to retirement, death, or disability. But Social Security was meant to be a foundational element of planning for retirement, not the only source of income after retirement. Here are five important facts about the program:

1. Social Security Provides Retirement Protection

   According to the Social Security Administration, about 97% of adults age 60 to 89 receive Social Security benefits. While those benefits do provide a percentage of your pre-retirement income based on your lifetime earnings, the payments may be far less than your monthly expenses. In June 2019, the monthly Social Security benefit averaged $1,470 (or $17,640 annually).

    

2. Social Security Provides a Guaranteed Progressive Benefit

   Social Security is a progressive benefit. That means that workers in the lower-earning levels receive a higher proportion of their previous earnings than do higher-earning workers. But while higher earners can typically expect that Social Security will replace a smaller percentage of their prior earnings, that benefit will be larger, in dollar terms, than for a lower-wage earner.

    

3. You’re Contributing to Social Security Through Taxes

   If you’re working, you’re likely making payroll tax contributions to Social Security. For 2019, the tax rate is 12.4% on the first $132,900 of wage income; you and your employer each pay half of the tax. Once you receive Social Security benefits, much of this income will likely also be taxable.

    

4. Social Security Benefits – Paid After They’re Due

   You’ll receive your Social Security benefits the month after they’re due – so, you’ll see a deposit for your November benefits in December. When you’re deciding when to start your benefits, plan accordingly.

    

5. Social Security Benefits Are Modest – But Important
   Nearly 64 million Americans will receive over $1 trillion in Social Security benefits in 2019. Nine out of 10 people older than 65 receive Social Security benefits and two out of three seniors depend on Social Security for most of their income after retirement.

Things to Know Before You Retire

Retirement income planning starts before you say good-bye to the working routine. Part of that planning is maximizing your Social Security benefit. Here are five things to consider as you evaluate when to claim your Social Security benefits:

• Know your full retirement age: If you were born after 1960, you must wait to age 67 to collect your full benefit.
• Understand about starting benefits early: You can begin collecting at age 62, but with a permanent penalty that will reduce the amount you can collect by 30%.
• Consider the impact of working and taking Social security: If you are at full retirement age, you can work and collect Social Security benefits at the same time. However, when you file before you’ve reached full retirement age, you’ll be given a Social Security earnings test. This test could result in the Social Security Administration withholding some – or all – of your monthly Social Security benefits if you are still earning wages.
• Think about delaying benefits until full retirement or later: Waiting to claim your benefits until you reach full retirement age means you will earn your full benefit. If you delay receiving your benefit past your full retirement age, you will earn even more. Full retirement age for people born between 1943 and 1954 is age 66. For those from 1955 to 1959, it is age 66 plus up to 10 months. For those born in 1960 or later, full retirement age is 67.
• Learn about spousal benefit eligibility: Lower-earning spouses receive the benefits based on their spouse’s earning record. Spouses can earn an amount equal to up to 50% of the higher-earning spouse’s benefit. People married for at least 10 years may be eligible to receive benefits based on their ex-spouse’s employment earnings.

Start Planning for Your Retirement Now

Many Americans don’t have enough in retirement savings to sustain the standard of living to which they’re accustomed. Retirement income planning that doesn’t just rely on Social Security is critical. To maintain your standard of living after retirement, you’ll need to calculate your best retirement income, and start (or continue) saving toward that goal. You can sign up online to calculate your Social Security benefits now.

Smart saving, budgeting, and planning are key to living comfortably after you retire. Consider investing in an American Heritage Credit Union 59-month bump-up, 15-month, or 9-month IRA certificate. You’ll find some great tax benefits with these accounts, which can include that your contributions are tax-deductible, or your earnings will be tax-free. Get all the insight you need by partnering with a local financial advisor at American Heritage’s Investment & Retirement Center (IRC). Set up your free consultation to learn more and get started.