There is a lot to take into consideration if you are preparing for your retirement years. You should understand what to expect from government benefits, and what you cannot expect. With this in mind, we will look at Social Security in this post.
Qualifying for Social Security
When you are working and paying taxes, you invariably see that FICA is consuming a significant portion of your pay. The good news is that you are paying into the Social Security program when you pay these taxes.
You get one retirement credit for every $1,200 that you earn (this is the figure for 2014). You can earn up to four credits each year. Once you have accumulated a minimum of 40 retirement credits, you will qualify for Social Security when you reach the age of eligibility.
Explaining the age of eligibility is a bit more difficult than it may appear to be on the surface. People born between 1943 and 1954 become eligible for a full Social Security benefit at the age of 66.
The eligibility age goes up by two years each month after 1954. In other words, those who were born in 1955 become eligible when they are 66 years and two months old. If you were born in 1956, you would become eligible when you are 66 years and four months of age. The age of eligibility rises by two months each year until 1960.
Those who were born in 1960 and after become eligible at the age of 67.
We should point out the fact that this information is accurate at the time of this writing late in 2014. Things could change via legislative mandate, so you should pay attention as your retirement years approach.
It is possible to take an early retirement benefit when you are as young as 62 years of age. However, if you go this route, you will receive a reduced benefit. Plus, you are penalized and your benefit is reduced even further if you earn more than the amount that is allowable. Throughout 2014, the annual limit has been $15,480.
On the other end of the spectrum, you can choose not to submit your application when you reach the age of full eligibility. If you do this, you will earn delayed retirement credits. This would result in an increase in your benefit of 8 percent per year that you delay your retirement.
However, the accrual of delayed retirement credits would end when you reach the age of 70.
The benefit that you receive will be based on your 35 highest earning years. You can visit the Social Security Administration website to find out what you can expect to receive when you become eligible.
If you would like to discuss your future with a licensed professional, feel free to send us a message through this page to request a free consultation: San Jose CA Retirement Planning Attorney.