October 2, 2013   Retirement Planning

Understanding Social Security Benefits

Although over 57 million Americans receive Social Security benefits, most Americans do not fully understand what Social Security is or what benefits it provides.
Retirement benefits are perhaps the most popular facet of Social Security. These benefits are based on the premise that, throughout your working career you pay a portion of your earnings into a trust fund. The fund then provides income to you when you retire or become unable to work due to disability. The amount of income you will receive from Social Security will depend on the amount of money you earned throughout your working career, as well as the year in which you were born.
A person becomes eligible for Social Security through working and paying Social Security taxes. By paying these taxes, a person earns Social Security credits. You will only receive benefits if you have enough credits. Importantly, credits are earned throughout your entire working career. Should you stop working for several years, then return to work, your old credits will remain on your record, and you will continue to earn credits when you return to work.
If you were born between 1943 and 1954, your full retirement age for purposes of Social Security is 66. For those born after 1954, the full retirement age increases by two months, every year, until the age reaches 67 for those born in or after 1960. You may retire and collect benefits before you reach your full retirement age; however, these benefits will be reduced. The upside to reduced benefits is that you will receive these benefits for a longer period of time.
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