The Social Security Administration (SSA) sends out benefit checks to around 70 million Americans each month. Each year, a new cohort of retirees will begin receiving their first benefit checks. Here are some tips and influencing factors to consider regarding your Social Security benefits, as shared by experts.
The Social Security program
After its establishment in 1935, little under a century ago, the Social Security Administration has been providing vulnerable Americans such as retirees, disabled individuals, and survivors with monthly benefit checks that serve as a staple, and sometimes sole, source of income. As of June, history will be made within the agency as the SSA anticipates that the average monthly Social Security benefit amount for retirees will cross over the $2,000 threshold.
A common misconception is that Social Security will fully replace the pre-retirement income of a beneficiary. In reality, however, only around 40% gets covered and this is on the assumption that benefits do not get cut. Upon retirement certain expenses such healthcare, housing, or even entertainment and utilities or repairs may increase whilst other expenses will also drop.
According to experts, there are three main factors that have an influence on your Social Security benefit:
- Work history
- Earnings history
- Age at which you begin claiming
By having a good understanding of these three factors and how they work, you can better understand how to maximize your monthly benefits.
Tips to maximize your monthly benefits
If an individual delays claiming their benefits beyond their Full Retirement Age, they will receive a higher monthly amount when they do eventually begin claiming. However, it is crucial to evaluate all of your options before making a decision so as to determine which age will be most fruitful to begin claiming. For this purpose, the SSA has a calculator tool that can be used to estimate how much you will be eligible to receive at various ages. With this tool, you could also get a close estimate of how much your benefit will be increased by if you hold off on claiming beyond your Full Retirement Age.
The amount an individual will receive is determined in relation to the top 35 years that they had worked and earned. It is recommended to have worked for at least this long so as to ensure any low-income earning years do not impact your benefits negatively. In a similar grain of things, working for longer than 35 years can positively impact your benefits, especially if your income increased over the years. In short, higher income in the later years will replace the lower income of your earlier years working which will ultimately result in a higher benefit amount.
Additionally, you could potentially receive higher Social Security benefits in the future if you increase your personal income and save for retirement.
The Motley Fool, a private financial and investing advisory firm, suggests that “individuals make regular contributions to a retirement savings plan. This can range from as little as $50 in some months to as much as $250 when finances permit.” A reliable way to ensure you remain consistent with your goals and your savings plans is to set up automated contributions.
Having a good understanding of your Social Security benefits and how to maximize the benefit amount you will receive each month is valuable knowledge. However, it should also be noted that the program could face significant shifts and changes by the time you do actually apply to be a beneficiary. According to projections, the Social Security Trust Fund could be depleted within the next decade, by 2035 and as a result, the program will no longer be able to pay all scheduled benefits.
Naturally, the government would hope to avoid this, and as such, changes to the program are likely to occur. “If modifications occur before 2030, it’s advisable to reassess your retirement plan and consider delaying benefits if necessary,” according to The Mirror.