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Essential Social Security Facts for Retirees

Filed under: Retirement

Multi Generation Family Sitting On Sofa With Newborn BabyYou already know that Social Security will comprise an important part of your retirement income planning. But despite its importance, and the enormous size of the program, many retirees don’t actually know all that much about it! Here are seven essential facts that every retiree should know about Social Security.

Your money is not set aside in a special account. The idea that the money you paid into the system has been set aside for you is a common misconception. In reality, current Social Security taxes pay current Social Security benefits. When you retire, your benefits will be paid by younger workers, just as your taxes currently cover benefits for today’s retirees.

Social Security is not running out of money. Well, not exactly. Benefits are paid by today’s taxes, but the current tax rate is not sufficient to cover all benefits. The extra funds are taken from the Social Security Trust Fund – for now. But that fund will run out of money by about 2030 or so. At that point, benefits could be cut or income taxes will have to be raised.

You can’t count upon receiving the average benefit. You might have heard that the average benefit amount is currently $1,341. But remember that number is just an average; actual benefit amounts range from about $700 to around $1,800.

Checks can actually decrease. Retirees count upon annual cost of living adjustments (COLA) to add a bit of money to their monthly checks. But in years that inflation remains flat, you might not receive a COLA. That means your check stays the same as it was the previous year. But if Medicare premiums increase, you might actually receive a smaller check that year!

You can receive Social Security while working. Once you have reached full retirement age, you can draw your full Social Security benefits no matter how much money you make. But if you claim benefits earlier than your full retirement age, your checks could be reduced depending upon how much you earn through employment.

Your spouse can receive your benefit after you pass away. If your benefit is higher than your surviving spouse’s benefit, they can opt to receive it instead. If they are full retirement age or older, they will receive 100 percent of your check amount; if they are between 60 and full retirement age the check will range between 71.5 and 99 percent of your benefit amount.

Some people pay taxes on their Social Security checks. According to certain threshold amounts, you might have to pay taxes on up to 85 percent of your benefits!

For more information on your Social Security benefits, including strategies to maximize your checks, call our office to schedule an appointment. We specialize in helping retirees and pre-retirees identify the strategies that work best for them.