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Facts About Social Security

Will Social Security run out of money before I retire?

The media has made a lot of noise over the potential that Social Security could dry up, leaving future retirees without any benefits. Is it true, or just hype? Based on current estimates from the Social Security Administration, the reserves could be depleted by 2034, funds collected after that will cover 75% of scheduled benefits. What does that mean? It means that, if you plan to retire after 2034, it's possible that Social Security will cover a smaller portion of your retirement income needs than someone retiring today.

How much of my retirement income might Social Security provide?

You must have at least 10 years of earnings on which you paid Social Security taxes to qualify for any benefits. If you qualify for benefits, the amount you receive depends on a number of factors, including:

  • How much you earned over your lifetime. The more you earned, the greater your monthly benefit will be, up to the maximum amount (which in 2017 is $2,687).
  • The age when you apply for benefits. If you wait to apply for benefits until full retirement age or later, you'll receive a higher monthly benefit. Full retirement age varies from age 65 to 67 by year of birth. For those born after 1960, full retirement age is considered 67, but that age may change. If instead you apply early, at age 62, your benefit will be reduced by 25%.
  • Your marital status. If you are married, there are rules on spousal benefits which could work to your advantage. There are different rules for widows and widowers. Further, if you are divorced, you may be eligible for benefits on your ex-spouse's earnings record.

Your benefit amount is calculated based on your highest 35 years of earnings. To view your benefits statement, go to My Social Security and set up your account.

When should I claim benefits?

Deciding when to claim benefits is an important part of understanding your Social Security benefit. If you file before you reach full retirement age, your benefit is reduced. For example, if you decide to start taking benefits at age 62, you'll receive 75% of your full retirement benefit.

Social Security was not intended to be your only source of income in retirement. Think of it as a way to supplement what you save in your employer-sponsored retirement plan or IRA. Creating a strategy to claim your Social Security benefits can be complicated, so consider consulting with a financial advisor before making any decisions.