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You obtain eligibility for Social Security through the accumulation of retirement credits. When you pay FICA or self-employment taxes, you earn these credits. Even if you work part-time on a consistent basis, you will receive four credits each year, which is the maximum annual accrual.
Once you have 40 credits to your name, you will qualify for Social Security. If you have not earned enough retirement credits, but you are married and your spouse has done so, you can qualify based on the your spouse’s work record.
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The answer to this question has a few different facets. First, there is the age of full Social Security eligibility, and the parameters are a bit convoluted. If you were born between 1943 and 1954, you will be eligible for a full benefit when you are 66 years old.
That’s simple enough, but it gets complicated from there. The eligibility age then goes up by two months each year, so someone that was born in 1955 would become eligible two months after their 66th birthday.
This two-month per year graduation continues until 1960 when it tops out at 67. As it stands at this time, anyone that was born in 1960 or after will become eligible for a full benefit when they are 67 years of age.
You can decide to receive an early benefit when you are as young as 62 years old. That sounds great on the surface, but if you do so, your benefit will be reduced by somewhere between 25 percent and 30 percent. The exact amount of the reduction will depend on your year of birth.
Another negative thing about an early benefit is the fact that you would have a limit on the amount you can earn before you would be penalized. It changes annually, but it is quite modest, so taking an early benefit while you are still working full time would not make a lot of sense.
It is possible to delay the submission of your application beyond your full retirement age, and this would increase your benefit when you start to receive it.
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The exact amount of your Social Security benefit will be based on your 35 highest earning years. You can find out your projected payouts at different ages if you register your account on the Social Security Administration website.
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At the time of this writing, it is 65, but there have been discussions about raising the age to save money. This is something to keep an eye on when you are looking ahead toward your retirement years.
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Though there are some hybrids, generally speaking, there are two major types of individual retirement accounts: the traditional variety, and Roth IRAs. With a traditional individual retirement account, contributions are made before you pay taxes on the income.
Taxation works in the reverse manner with a Roth IRA. Your deposits into a Roth individual retirement account would be made after taxes have been paid.
With both types of accounts, you can take penalty-free withdrawals when you are 59.5 years old. Since taxes were already paid, distributions that are taken from a Roth IRA would not be subject to regular income taxes. Conversely, you would have to pay taxes when you take money out of a traditional individual retirement account.
You are required to start taking mandatory minimum withdrawals when you are 70.5 years old if you have a traditional individual retirement account. There is no such requirement when you have a Roth IRA, because the IRS does not have to find a way to start to collect taxes on the contributions.
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With a traditional individual retirement account, the distributions would be subject to taxation, and the distributions would be mandatory. The beneficiary of a Roth IRA (if it is someone other than your spouse) would also be required to take distributions, but they would not be taxed.
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