Most people end up relying on benefits from the government when they retire — specifically, Social Security benefits. Social Security is a program run by the government that provides you money in your retirement based on a number of different factors; the only main caveat is that, unless more money is provided, the government’s Social Security trust is predicted to run out in 2034. But for most people, this is not a major worry — rather, learning more about this complex program is, so that they can better plan for retirement. Here is some important information about the program.
Factors that impact the value of your benefit
Social Security is not a fixed-value check that everyone receives every month; rather, the value of the benefit depends on your circumstances. Here are a few modifying factors:
- When you take your benefit. If you take your benefit before retirement age (you can start getting benefits at 62, but retirement age is defined by the government as 65), your benefit will be reduced. Conversely, delaying your benefit until after retirement age provides you a boost to your benefit, up to age 70.
- Other benefits for which you are eligible. If you are a public sector employee (for example, a teacher), you probably are able to get other benefits; receiving these will impact your Social Security payments.
How does the government calculate your payment?
The Social Security Administration (SSA) goes through a complex process to determine your payments. This is complex, but various calculators are available to provide you with estimates. Here are the general steps:
- The SSA examines your earnings over the course of your career and indexes them based on changes in average wages over time.
- The SSA calculates your indexed monthly earnings based on the 35 highest-paying years of your career and determines your monthly payment.
Social Security benefits are very complicated, but this information should be able to help you get a start preparing for retirement. If you have any other questions, simply contact us here.