I recently signed up for My Social Security where anybody can track their Social Security benefits online. Even though I don’t count on Social Security in my passive income calculations, I still expect SS benefits to be there for all working Americans who contributed to the system. There would be a civil war if Congress decided one day to stop paying Social Security benefits!
After signing up for My Social Security, I could see the same paper statement form they mail to all of us, but now in PDF form. Here’s what my benefits say:
* $2,566 a month in benefits at full retirement age of 67
* $3,182 a month in benefits at retirement age of 70
* $1,803 a month in benefits at retirement age of 62
* $1,917 a month for my child or spouse if I die today.
* $2,533 a month in disability benefits if disabled right now! This is probably the biggest surprise. What’s really stopping someone from taking a leap of faith if they have health insurance and disability benefits to back them up?
Not enough to live entirely on, but better than mud in the face. In fact, I just realized this is the maximum Social Security benefits one can receive after checking with a couple other friends who all have more or less the same figures.
The caveat emptor written in the Social Security statement is: “At your current earnings rate, if you were to work until age………” In other words, what if I can’t continue earning what I’m earning now? Furthermore, what if I want to no longer work and just live off passive income for the rest of my life? What benefits will early retirees get?
SOCIAL SECURITY BENEFITS FOR EARLY RETIREES
If you ever plan to retire early, hopefully you’ve been wondering these same questions. Lucky for you, you’ve found this post and I’ve got some answers! Here are some key points:
* Everybody’s situation is different. People earn different amounts of money and decide to retire at different ages. As of 2012, we know that Social Security is taxed up $110,100. We also know that the government considers the earliest retirement year for Social Security benefits at 62, and full retirement age for Social Security benefits at 67.
* Sign up for My Social Security to see your benefits like I have done above. In order to plan for retirement, you need to understand the inputs.
* Everyone needs to qualify for 40 credits over their working lifetime to qualify for Social Security benefits. You earn one credit for each $1,130 of wages or self-employment income. You can only earn 4 credits a year maximum, hence the need to work for 10 years or more at the minimum. Doing the math, you must earn $4,520 a year to qualify for for credits. 40 credits is the minimum and maximum threshold ie if you work for 20 years and earn at least $4,520 a year, you don’t get 80 credits.
* Call Social Security to ask about your specific scenario! Once you understand all your benefits, call Social Security at 1-800-772-1213 to get answers to your specific questions. In my case: Do I have to keep working and contributing until age 62 to get benefits? What are my benefits if I stopped working now in my mid-30’s, and when can I collect? I was put on hold for 10 minutes and spoke to a lovely lady who answered my questions.
* Because I have fulfilled the threshold of 40 credits, I am eligible to receive Social Security benefits when I am 62, even if I do not work again. The Social Security lady said that I will receive $1,004 a month at age 62, and $1,450 a month at age 67 if I stopped working. The negative is that I have to wait for 27 years to start collecting, and who knows what my benefits will be! Most early retirees have worked for at least 10 years and have fulfilled the 40 credit qualification threshold, otherwise, they wouldn’t be able to retire!
SOCIAL SECURITY FOR ALL
After reading this post, hopefully you all have a better understanding of how Social Security works. I had a nagging irrational fear in the back of my mind that in order to qualify, I had to work until 62, and if I quit before then I wouldn’t receive a dime. I knew this was not the case, and I finally gave Social Security a call and wrote this post to confirm.
The topic of when to start receiving Social Security benefits (62, 67, 70 or anytime in between) is a personal decision based on the amount of money you have at the time and how long you think you’ll live. Do note that there is a ridiculously low income cap you are allowed to make in order to qualify receiving Social Security from ages 62-66. Only until 67 is there no more income cap and subsequent Social Security deduction.
You can count on Social Security benefits when its our turn to collect. Just don’t include your benefits in your pro forma retirement to keep you focused on saving, diversifying, and building those passive income streams. If the Social Security payments come, fantastic! If not, you never really counted on them in the first place.
Readers, care to share how much in Social Security benefits you will receive in retirement? How do you calculate the benefits, if at all in your future?
Note: There are more nuances to Social Security than discussed here. Hopefully there will be some retirees out there already collecting who can provide more insight.
Suggested reading:
“How To Retire Early And Never Have To Work Again”
Regards,
Sam
Nice timing as I actually have signing up for the online system on my to do list. Thanks for the reminder! They actually don’t send out any paper statements anymore btw. It makes sense for them to save money on printing costs and postage – whatever it takes to keep the system chugging along, right?! I think they also require people receiving benefits to use direct deposit so they don’t have to send out checks anymore.
I didn’t know about the 40 credits requirement, so thanks for teaching me about that! And that’s also good to know that once we hit that and if we were to stop working we’d still be able to collect benefits later on.
I looked at my statement for the first time this year. I had never gotten a paper one before and most people my age probably don’t even know those statements exist. Just FYI I think the 2012 Wage Base went up to $110,100 based on a quick google search. $106,800 was for 2011 I think. (I used to work at a CPA firm…)
I’m glad you posted this, as I’ve not heard of it before. I’m heading over to check it out now – although I truly believe that my benefits will be substantially lower than anything it says.
It’s uncertain that social security will be around in 30 years in it’s same form. I’m sure they’re not going to abolish it altogether. The part I find most interesting is the substantial difference in benefits if you wait until 67 or 70. My father in law worked until he was 80 and gets a very large ss payment.
It’s cool that you found the ability to find out what we will be paid several years from now. My step father just stopped working and is collecting. He is 73 and has had his place for over 40 years. He can live comfortably not making much and still doing the things he loves.
I checked mine out and thought it was pretty interesting. I like the website more than I did the paper copies. Of course, I’m more interested in finances now than when I was getting the paper copies so that may have something to do with it.
Honestly, I don’t ever think about social security because I assume it won’t be there, but you know what? You’re right, it SHOULD be. It should! We’re surely paying for it, aren’t we? If I get to the ripe old age of 67 or 62 and there’s nothing left for me because the government was dipping in and stealing it out… there’s gonna be a the biggest revolution and protest EVER!
Bust out your pitchfork if come 62 and the government says, “NO SOUP FOR YOU!” A revolution indeed!
Very interesting. I just signed up and it said I’d get around $1,500 a month. I just don’t know if I believe that it’ll be around in 43 years.
$1,500 is better than a poke in the eye! The point of this exercise is to know what might be… the more we know, the better our finances b/c we will plan better.
Social Security will most definitely be around most of us retire (assuming the average blogger in our midst is in his/her thirties). I attended a continuing education class and read some studies recently that all said the same thing – by the late 2030s, Social Security reserves will run out and something will have to be done to manage the lower number of workers for every retiree. We could see older retirement ages, but I’m betting we’ll see lowered benefits, especially at higher incomes. This study by the Urban Institute says we can expect Social Security to only have enough money in the year 2037 to cover 3/4 of benefits. http://www.urban.org/publications/412253.html
There are so many large programs that need attention – who knows what we will be looking at in 25 years? I predict much higher taxes. Honestly, I don’t see how we can afford to keep operating the way we do now with the level of taxes we currently have in place.
I’m just surprised that the report shows I get something, even if I don’t work for the next 25+ years, thank goodness.
SS will be around, and even if we can’t avoid the inevitable retirement age increase from 67, we have a choice to stop working to not pay taxes!
That’s awesome that you can kick up your feet for a few decades and still get something in the mail. As to you point about SS being there – I agree :) . All the sensationalism around SS running out is just that – sensationalism. As a fund it’s not something that just sends payout’s in some kind of straight line continuous payout scheme.
SS is definitely upside surprise for sure. I encourage you and everybody to register, long on, and check what your respective benefits are. The amounts could surprise!
I have 40 credits too. I’m sure you will make earned income even after you retire. The websites will generate earned income and that should keep your credit rolling. Even if you take a few years off, you can resume earning a small amount of money to contribute to the credit. I’m sure I’ll earn some income after I retire. The social security payment will help, but I’ll just ignore it until I receive it. It will be a bonus for traveling or buying gifts for grandchildren. :)
Nice. Yeah, total bonus money for sure!
Dang, I only have 38 credits, so I can’t see my projected benefits. I do agree that we should NOT plan on SS for our necessities, but I do think it will be there. Like RB40 said, it’ll be traveling and gift money. If SS does run out, do you really think our nation will implode on itself in Civil War and then release the T-virus, turning everyone into zombies, causing a global meltdown and the possible extinction of the human race?
I definitely think the T-virus will be released if citizens start getting denied SS benefits!
I follow the credit markets and government policy 365 a year. I hate to be the downer on here but just THINKING there will be a SS fund 30 years from now makes it harder to make sure there is anything for you then. Forget the revolutions, the gov will have long, long before defaulted on many of its obligations if you go along thinking it WILL be there. It WON’T be there unless you start acting like it WON’T be there for you.
It is mathematically impossible for the gov. to provide anything like what they have promised in benefits with dollars whose value is close to today’s. Trillions of unfunded liabilities will not be paid in 2012 dollars. What sounds like traveling money today will be then, too…maybe a tank of gas.
The faith that gov. can somehow magically conjure up wealth where there is none will wreck every dream you have. As young people, you should be all over your congressional reps NOW. Hey, I’m 62, I’m covered. But for your benefit, I’m telling you: Don’t believe it will be there in anything like a form you’d recognize 30 years from now unless you make it a point to have politicians who will deal with this realistically.
Am I willing to give up some of my benefits so you young people aren’t shafted? You bet, that’s the American way to do it. Don’t be a patsy and trust the headlines. You need to fight for what you’re paying into if you want to salvage anything of value from it.
Good thing “young folks” don’t care or expect SS to be there for us when the time comes to collect. We’re focused on making our own wealth.
I assume that the income is taxable. If so, $1,004 your gross income per month at age 62? It seems that the best solution is to keep working till 70 to reap most reward from the system. Our government keeps using statistical models to use average longevity with the hope that — if you wait till age 70 — you won’t live long to collect big checks. With the advent of medicines, people are living longer. So it’s going to be a drag on the system. I really think that privatizing SS is the long term solution.