Understanding How Social Security Works to Fund Your Retirement

Elder law attorneys provide you with assistance creating a retirement plan.  Making a plan for your retirement is vitally important because most workers today do not have a company defined benefit plan to provide guaranteed income from an employer after retirement. As a result, workers end up dependent upon Social Security and on their own savings to pay for their costs of living in their old age once they are no longer in the workforce. 

Parman & Easterday will assist you with your retirement planning process at all stages of your life. Early in your career, we can help you take steps to ensure you are saving enough for retirement and to protect your growing nest egg. We can also help you as you are nearing retirement to understand how you’ll fund your retirement and to make a plan for withdrawing from tax-advantaged accounts, such as IRAs, which have special tax rules. You should give us a call today to find out about the assistance our legal team can offer when it comes to achieving financial security during your golden years.

How Social Security Helps Fund Your Retirement

One of the key issues that you need to understand in order to make a viable retirement plan is the role that Social Security will play in funding your retirement expenses. According to a Gallup poll, around 1/3 of Americans expect that Social Security will be a major source of their retirement income. Unfortunately, many people do not realize how their Social Security benefits are calculated and don’t realize that Social Security benefits alone are typically not enough to fund a secure retirement.

Social Security benefits are calculated based on your average wages over your highest 35 years of working, with the wages adjusted to account for inflation. If you claim benefits before you have 35 years of working experience in, then the Social Security Administration will factor in some years when you have $0 in wages. This can have a big impact on lowering your overall benefits, so you should think about whether you want to claim Social Security before you have accumulated 35 years of workplace participation.

The benefits calculation determines what your standard benefit will be if you retire at full retirement age (FRA). Contrary to popular belief, full retirement age is not 65 for most workers. Your full retirement age depends upon your birth year. If you were born after 1960, then your full retirement age is not until the age 0f 67.

While you are able to claim benefits before the age of 67, doing so will cause your benefits to be reduced permanently. You can start drawing Social Security starting at age 62, but benefits are reduced by 5/9 of 1 percent for each month you claim before full retirement age — and if you claim benefits more than 36 months before FRA, then benefits are reduced by an additional 5/12 of one percent for each earlier month.  You could see as much as a 30 percent reduction in benefits if you claim benefits at 62 when your full retirement age is 67. Therefore, you may not want to claim benefits that early if you are going to be reliant on Social Security to provide a big portion of your income.

If you wait to claim Social Security benefits until after full retirement age, your benefits actually go up. Benefits increase up until the age of 70, when you no longer get a higher monthly benefit for waiting longer to start claiming your Social Security income.

Since you can get a higher benefit from waiting to claim Social Security, you may want to wait even if you do decide to retire early. However, if you wait to claim benefits but you end up having to retire before age 67 because physically you can no longer work, or because you cannot to find a job, you would need to have money to support yourself until you are ready to claim Social Security benefits. This is one key reason why you want to make sure you are saving money for retirement.  Parman & Easterday can help you to save money in accounts that provide tax breaks.

Having savings is also important because, for most people, Social Security benefits alone are too low to live comfortably on.

Getting Help From Elder Law Attorneys

Parman & Easterday will provide you with advice on making a retirement plan and taking steps to protect your wealth. You should join us for a free seminar to find out more about the retirement planning assistance that we can offer you. You can also give us a call today at (405) 843-6100 or (913) 385-9400 or contact us online to make your personalized retirement plan.