Social Security benefits currently represent approximately 33%
of the aggregate total income of Americans aged 65 and older,
according to the Social Security Administration. For future
generations of retirees, Social Security may represent a much
smaller percentage of retirement income.
A System at Risk
When Social Security was established in 1935, the average life
span among Americans was 63 years. Today, the average lifespan is
almost 79 years, according to the Center for Disease Control
In 1950, 16.5 workers paid retirement benefits for each retiree.
By the year 2033, when baby boomers will be leaving the workforce
in large numbers, the ratio may be approaching over two workers to
every one retiree. By then, the burden of taxes on each worker may
well be unmanageable. This aging of the population has led some
experts to predict that the Social Security Old Age and Survivors
Insurance Trust Fund may run out of assets by the year 2033, a
possibility that makes building your own funds for retirement more
important than ever.
Does all of this mean you will have no Social Security to draw
on when you retire? While an exact timetable of what will happen to
Social Security is uncertain, present trends clearly indicate that
your own efforts to build financial security for your retirement
years are more crucial than ever. The time to begin planning for
retirement -- no matter your age -- is now.
Even under the best scenario, the Social Security system was
created as the foundation for retirement, but it was never intended
to provide the sum total of financial security during the
retirement years. So the more you can do for yourself to save and
invest for retirement, the better off you may be.
How Much Will Social Security Pay?
The exact amount of your Social Security benefit will depend
upon your earnings history. You can obtain an estimate of your
benefits at the Social Security Administration's online estimator.
You can also call the Social Security toll-free number at (800)
772-1213 and request form SSA 7004, the "Request for Personal
Earnings and Benefit Estimate Statement." Complete the form and
send it back. You will receive a personalized estimate of your
benefits, plus a statement showing your annual earnings. Like
reconciling your bank statement, your Social Security summary of
annual earnings should be verified against your tax return
statements, W2 forms, or your own records. If there are any
discrepancies, report them at once.
|Shares of Aggregate
|For all people age 65 and older:
|Social Security Benefits
|Source: Social Security Administration, Fast
Facts & Figures About Social Security, 2017.
How Social Security Works
Social Security contributions are paid by you and your employer.
Your contributions were deducted from your paychecks since the day
you started working and are matched by an equal amount paid by your
employer. These contributions pay for:
-- Collectible at any time after age 62 and based on the number of
years you've been working and the amount you've earned. In some
cases, your children and your spouse may also be eligible for
benefits on your account.
-- A kind of life insurance coverage available to your spouse and
insurance -- Provides a monthly income in the event you
are unable to work due to a disability. Eligibility depends on the
number of "credits" you have earned and your age.
Entitles you to medical benefits and coverage, including hospital
insurance after age 65. Bear in mind that Medicare is also
experiencing funding issues, and the Hospital Insurance Fund could
run out by 2028.
Social Security Benefits for Other Family Members
When you receive Social Security benefits, other payments may
also be made to:
- A spouse age 62 or older.
- A spouse under age 62 who is caring for a child under 16 or a
disabled child who is receiving benefits from your earnings.
- Unmarried children under 18 (or under 19) if they are enrolled
full time in high school.
When You Retire Determines What You Get
- Currently, you can retire at normal retirement age (between age
66 and age 67 depending on when you were born) and receive full
- Retire between 62 and normal retirement age and receive a
- Continue working and delay the receipt of benefits and get a
bonus for each year of work past normal retirement age, up to age
70. "Delayed retirement credits" currently amount to 8% in order to
encourage later retirement.
Changes in Your Monthly Benefits
Your monthly Social Security check may change to reflect the
- Cost-of-living increases.
- Eligibility for disability benefits after retirement but before
you reach normal retirement age.
Make the Most of Your Benefits
You must apply for Social Security benefits and for Medicare
benefits. If additional insurance is being considered, remember to
apply within six months of Medicare eligibility to be accepted
without regard to preexisting conditions. When you apply, you'll
- Decide whether you'll collect your own Social Security
benefits, based on your earnings and work history, or your
spouse's. Presumably, you'll want to choose the one that pays the
most. If you retire before a spouse, you can collect your own
benefits, then switch and choose the spousal benefits if they are
- Remember to apply for retirement benefits a few months before
you want them to start. Some time is required to process all the
paperwork, including Social Security number, proof of age, and
evidence of recent earnings (W-2 forms from the last two years, or,
if you're self-employed, copies of your two most recent tax
- Apply for Medicare before you retire.
- Apply for any additional health insurance within six months of
- Reconcile your Social Security earnings report with your own
records at three-year intervals. Report any discrepancies.
- Bear in mind that "earnings limitations" (which change each
year) may limit the amount you may earn while still receiving
Social Security benefits. Those limitations end when you reach
normal retirement age.
- Keep Social Security records up to date if you change your name
in order to have your earnings credited properly.
Regardless of your Social Security options, think of Social
Security as only a small percentage of your total retirement plan,
and set aside a portion of your income on a regular basis. Saving
and investing for your own retirement nest egg is a "must."