Plan Your Retirement
“We can never insure one hundred percent of the population against one hundred percent of the hazards and vicissitudes of life, but we have tried to frame a law which will give some measure of protection to the average citizen and to his family against the loss of a job and against poverty-ridden old age.” These are the words of President Franklin Delano Roosevelt as he signed the Social Security Act on August 14, 1935. As many folks know, Social Security was never meant to be the only source of income for people when they retire. Social Security replaces about 41 percent of an average wage earner’s income after retiring; yet most financial advisors say retirees will need 70 percent or more of pre-retirement earnings after retiring. A secure, comfortable retirement is every worker’s dream. And now because we’re living longer, healthier lives, we can expect to spend more time in retirement than our parents and grandparents did. Achieving the dream of a secure, comfortable retirement is much easier when you plan your finances. The Social Security Administration has a variety of information that will help us do just that.
Our Retirement Planner at http://www.socialsecurity.gov/retire2/ is a handy, one-stop location that contains numerous topics and online tools that can be very useful in addressing your particular situation. For example, when people ask me what’s the best age to apply? I explain that you can retire at any time from age 62 onward. If you start benefits early – say at age 62 – your benefits are reduced a fraction of a percent for each month before your full retirement age. Find your own full retirement age at http://www.socialsecurity.gov/retire2/retirechart.htm. As a general rule, early or late retirement will give you about the same total Social Security benefits over your lifetime. If you retire early, the monthly benefit amounts will be smaller to take into account the longer period you will receive them. If you retire late, you will get benefits for a shorter period of time but the monthly amounts will be larger to make up for the months when you did not receive anything. Each person’s situation is different, so keep in mind that there are other things to consider when making the best decision about your retirement benefits. Here are a few questions to ask yourself –
- Are you still working?
- Do you come from a long-lived family?
- How is your health?
- Will you still have health insurance?
- Are you eligible for benefits on someone else’s record?
- Do you have other income to support you if you decide to delay taking your benefits?
- Will other family members qualify for benefits with you on your record?
While Social Security doesn’t have answers for everyone, some of the information at http://www.socialsecurity.gov/retire2/otherthings.htm may be useful for you. There’s an example of this at http://www.socialsecurity.gov/retire2/agereduction.htm# of how an unreduced monthly benefit of $1000 is affected by other considerations. There is no one “best age to apply” for everyone and ultimately, it is your choice. You should make an informed decision about when to apply for benefits based on your individual and family circumstances. The amount you receive when you first get benefits sets the base for the amount you will receive for the rest of your life. Accidents or unexpected changes in your circumstances can’t be ruled out, of course, so your final decision may be based on your “best guess” about your future.
Some folks choose to delay benefits until after full retirement age, when benefits will be increased based on the number of months they do not receive benefits between full retirement age and age 70. Check out http://www.socialsecurity.gov/retire2/delayret.htm But a word of caution: If you apply for benefits more than 6 months after the month you reach full retirement age, we can only pay past benefits for the previous 6 months. And, there is no additional benefit increase after you reach age 70, even if you continue to delay taking benefits.
Social Security has a self-paced tutorial at http://www.socialsecurity.gov/retire2/applying1.htm that is easy to use, and addresses some our different circumstances. For example, do you plan to keep working beyond full retirement age? Depending on your answer, our Retirement Planner provides information that may help you decide how to factor in different work plans for yourself. If you’re unsure about retiring but are close to age 65, you can find out how to apply for just Medicare at http://www.socialsecurity.gov/retire2/justmedicare.htm. You may need to sign up for Medicare close to your 65th birthday, even if you will not be retired by that time.
Do you anticipate receiving a pension due to work that is not covered by Social Security? If so, find out about the Windfall Elimination Provision and the Government Pension Offset at http://www.socialsecurity.gov/retire2/qualify.htm and learn how certain types of earnings and pensions can affect your benefits. Social Security’s Retirement Planner also tells you how members of your family may qualify for benefits when you visit http://www.socialsecurity.gov/retire2/applying7.htm. When it comes time to apply for retirement benefits, it’s a snap at Social Security’s website https://secure.ssa.gov/iCLM/rib But if you’re not sure, view a demo of our Online Retirement Benefit Application and find out for yourself at http://www.socialsecurity.gov/onlineservices/planners/Online_Application/oa.htm. I guess you can tell that I’m a fan of Social Security’s Retirement Planner. I like it simply because it has so much information in one place that’s easy to understand and use. But there’s no need to take my word for it – see for yourself and view a demo of our Online Retirement Planning CD. Like the demo of our Online Retirement Benefit Application, it will take you through and explain some the items I’ve been describing in this column. The link is http://www.socialsecurity.gov/onlineservices/planners/Online_Retirement_Planning/orp.htm. Both demos have audio and video so they’re easy to follow.
Here’s one last tip if you want to find out more about Social Security at another one-stop location. Simply visit Near Retirement. It has a comprehensive list of topics you can choose from at http://www.socialsecurity.gov/retire2/near.htm Let Social Security help you plan your future.