Did you know that you should be checking your social security earnings record at least once a year after turning 50? You want to ensure it contains no errors so that it does not affect your benefits once it comes time to begin withdrawing them. Even a single error could have a significant impact on your retirement.
What is a Social Security Earnings Record?
This is a record of all the income you’ve earned during your working lifetime. Social security benefits are based off the 35 years during which you earned the most. If by mistake, one of those years was listed as a non-earning year (or a $0 earning year), then that would be included in your benefits calculations. The end result is a smaller benefit check during your retirement years.
How Much Smaller?
A single mistake such as a non-earning year when you did, in fact, work, could create a deficit of as much as $100 a month once you begin collecting social security. That $100 a month could be the difference between a comfortable retirement and barely scraping by, or between barely making it and not being able to make it each month without significant savings withdrawals.
When to Start Checking
It is never too early to begin checking your social security earnings report, so you could begin keeping track as soon as you start earning wages. If they have not already, however, individuals should begin checking their report for errors at least beginning at the age of 50. This gives plenty of time to correct any issues which may arise before you need to start collecting your benefits.
Where to Check
You can check your social security earnings report online by going to www.socialsecurity.gov/myaccount. If you have not already created an account, you will be prompted to do so. If you do have an account, you need only to log in.
It is important to note that there is a statute of limitations on how much time can pass before an error is no longer able to be corrected. This timeframe is 3 years, 3 months, and 15 days. There are a few exceptions to the rule, however. Exceptions include purposefully fraudulent entries, mechanical errors, clerical errors, among others.
If You Find an Error
If you do find an error on your report, you should notify the Social Security Administration (SSA) as soon as possible. You can do this by submitting a form called the “Request for Correction of Earnings Record.” You will need to provide evidence that proves your wages were earned. This can be done by submitting one or more of the following documentation:
- Original or employee-issued pay slips (must include your name, social, gross wages, and the period covered)
- Wage verification from SSA-approved company
- Oral and/or written statement from the employer
- W-2 form
- Tax return
It is also important to respond to any correspondence about the error, should the SSA contact you with any concerns.Continue reading
Most people have not saved enough for retirement. The closer they get to the end of their working years, the more obvious this becomes.
The good news is that there is a minimum of seven different bills which could help if they were to be passed by Congress. Even more amazing is that some of these bills are prompting the cooperation of both Republicans and Democrats.
Retirement Enhancement and Savings Act (RESA)
If this bill passes it would require employers to tell their employees how much their 401(k) is worth in retirement – not just how much they have currently invested in it.
The idea is that telling people how little is invested in their retirement will generate greater motive to save.
Strengthening Financial Through Short-Term Savings Act
This second bill is designed to help people handle unexpected emergencies. People could sign up at work to have some earnings placed away, tax-free. The idea is to deter people from withdrawing from their retirement accounts, which often comes with heavy penalties.
The Millennial Problem
What does this have to do with millennials? Millennials are a sizable generation in American, which were born between 1982 and 2000. Their biggest worry is that they will never see as much as 80 percent of what they are paying into social security.
The fear is well-founded. Current funding levels for SSI will officially begin paying out higher amounts than it brings in during 2021. By the year 2034 the benefits people receive will need to cut by around 23% to offset this.
How to Fix It
There are a few ways that Congress could potentially fix the problem, although none of the solutions are particularly appealing for anyone. They are, however, better than the option of paying into a fund only to be unable to withdraw your rightful amount come retirement.
The current options being thrown around Congress include:
- Lift the wage cap so all wages are taxable. As of right now, the ceiling for taxed income is $128,400.
- Raise the full retirement age (again). This is currently set at 67 but moving the full retirement marker up another year or two can help offset some of the losses.
- Increase legal immigration so there are more young workers in the country, which would increase the amount of money going towards funding social security.
What Can Be Done?
If Congress doesn’t do anything than millennials will need to plan ahead for a shortage in social security funding, which could potentially drop monthly benefit amounts drastically. Exactly what can be done will depend on your risk tolerance, income limits, and other individual factors, but a few ideas include:
- Closed-end funds – Specialized portfolio usually concentrated within a specific niche or geographical location.
- Real estate investment trusts – Investments in properties producing income or mortgages.
- Asset management and business development companies – Investing in companies who invest in small companies who are likely to grow quickly.
- Master Limited Partnerships – Investment in the production of energy, transportation, processing, etc. This can include anything which generates 90 percent of its revenue from natural resources.
You probably expect Social Security to account for the majority of your retirement income. As such, it only makes sense to know as much as possible about these benefits. Here is some important information about Social Security we think you should know about.
#1. Your filing age can affect your benefits
Many people will become eligible to draw money at age 62. Even so, that does not always mean you should file for Social Security benefits at that time. Your monthly checks increase if you wait until full retirement age, which varies based upon the year you were born. For those born in 1960 or later, that age is currently 67 (not 65 as is commonly thought). The Motley Fool estimates that by filing too early, people can lose out on as much as 25% of their lifetime benefits.
#2. Put off collecting payments, but do not delay too long
You are not required to draw Social Security just because you have reached full retirement age. In fact, waiting past your full retirement age can net you an estimated 8% more in earnings each year. However, those benefits only extend so far, as they stop accumulating after age 70. After that time, there is no longer any incentive to wait.
#3. Your benefits may be smaller than you have anticipated
The average monthly Social Security payment is just $1,404 as of January 2018. That’s not an especially generous figure for most folks, as it comes out to less than $17,000 annually. Many retirees are shocked to discover just how little they are entitled to draw, and are unprepared to live on that amount. The truth is that Social Security was never intended to replace one’s income, but rather was designed to supplement pensions and other savings during your retirement years.
#4. Your Social Security income could be subject to taxes
Thirteen states including Vermont, Minnesota, and Connecticut all tax Social Security benefits to some degree. Others may tax benefits only if you have other income from interest or earnings. Your part-time earnings could even be subject to higher taxes in many states. This means you should not count on any set amount of “take home pay” until after you have reviewed state and local tax laws.
#5. Survivors can draw benefits
In some cases, widows and widowers can be eligible for survivor benefits. Generally speaking, if you are at full retirement age you can draw the same amount your husband or wife received before passing. You may even begin drawing benefits at age 60, provided you have not yet remarried (remarrying after age 60 will not necessarily render you ineligible). Disabled children are sometimes eligible for up to 75% of a parent’s benefits as well.
Knowing how Social Security works can help you get the most from this benefit. Planning to maximize your Social Security benefits is good, but saving and investing in other areas is even better. Speak with a retirement planner to ensure that Social Security is not the only income you must rely on.Continue reading
Anyone who was born between 1946 and 1964 is classified as being part of the baby boomer generation. Although the oldest members of this generation will be turning 69 this year, a shockingly high proportion of them have not planned nearly well enough for their retirement. Take a look at the information below to see what the next generation can learn with regards to safe retirement.
Don’t Rely on Social Security
Many baby boomers failed to implement any type of savings or investment plans for their retirement years because they firmly believed that they would be able to rely solely on Social Security payouts upon stopping work. However, what many of them don’t realize is that Social Security will only be replacing up to 40% of their pre-retirement income at the time that they stopped working.
This means that currently, the average retired person will only be able to collect a meager $1,341 a month in this manner – definitely not enough to live comfortably on. In addition, it is estimated that the Social Security Trust Fund will be depleted by 2029, which could result in retiree benefits from this program being cut by as much as 30% the following year.
Take Advantage of Workplace Savings Plans
On average, baby boomers usually expect to retire with as little as $127,000 in savings, which is nowhere near enough to live on – especially when you take into consideration that financial expert recommendations are that no more than 4% is withdrawn from any retirement fund per year. This would effectively translate into roughly $5,000 per year to actually live on.
Although a large number of workplaces offer a range of retirement savings plan options, up to 20% of baby boomers have not seen the need to contribute to plans such as 401(k) options. Not only is this putting their retirement at risk; it is in effect throwing away free money because many employers who offer these plans will put in a matching contribution up to a predetermined % of the employee contribution.
Take Lifestyle Changes into Consideration
Nowadays, many baby boomer retirees don’t want to just check into a retirement village and while away their final years. Many of them see this as a time to learn a new hobby or pursue an interest that they may not have had time to enjoy while working, such as traveling, taking up a sport or even becoming snow birds. While this is a good idea in theory, many boomers simply cannot afford to live this way because they did not make the right financial preparations ahead of time. If you would like to pursue a more active lifestyle, it is essential to start saving as early as possible so that you can make your retirement years as enjoyable as possible.
If you would like your retirement years to be as financially stress-free as possible, it is imperative that you speak with the right investment professionals. Contact us at Dream Bridge today to find out which investment options will be most suitable for you.
Social Security’s problems–namely, life expectancy is increasing and the birth rate is decreasing. This means that over time, fewer workers will have to support more retirees. According to the SSA, Social Security is already paying out more money than it takes in. However, by drawing on the Social Security trust fund, the SSA estimates that Social Security should be able to pay 100% of scheduled benefits until 2033. Once the trust funds reserves are depleted, pay roll tax revenue alone should still be sufficient to pay about 77% of scheduled benefits. This means that 20 years from now, if no changes are made, beneficiaries may receive a benefit that is about 23% less than expected. (Source: 2014 OASDI Trustees Report).
While no one can say for sure what will happen (and the political process is sure to be contentious), here are some solutions that have been proposed to help keep Social Security solvent for many years to come:
- Allow individuals to invest some of their current Social Security taxes in “personal retirement accounts”
- Raise the current payroll tax
- Raise the current ceiling on wages currently subject to the payroll tax
- Reduce future benefits, especially for wealthy retirees
- Change the benefit formula that is used to calculate benefits
- Change how the annual cost-of-living adjustment for benefits is calculated
Members of Congress and the President still support efforts to reform Social Security, but progress on the issue has been slow. However, the SSA still continues to urge all parties to address the issue sooner rather than later, to allow for a gradual phasing in of any necessary changes. Although debate will continue on this polarizing topic, there are no easy answers, and the final outcome for this decades-old program is still uncertain.Continue reading
Is it better to take reduced benefits at age 62 or full
benefits later? The answer depends, in part, on how
long you live. If you live longer than your “break-even
age,” the overall value of your retirement benefits
taken at full retirement age will begin to outweigh the
value of reduced benefits taken at age 62.
You’ll generally reach your break-even age about 12
years from your full retirement age. For example, if
your full retirement age is 66, you should reach your
break-even age at 78. If you live past this age, you’ll
end up with higher total lifetime benefits by waiting
until full retirement age to start collecting. However,
unless you’re able to invest your benefits rather than
use them for living expenses, your break-even age is
probably not the most important part of the equation.
For many people, what really counts is how much
they’ll receive each month, rather than how much
they’ll accumulate over many years.
Of course, no one can predict exactly how long they’ll
live. But by taking into account your current health,
diet, exercise level, access to quality medical care,
and family health history, you might be able to make a
How much income will you need?
Another important piece of the puzzle is to look at
how much retirement income you’ll need, based partly
on an estimate of your retirement expenses. If there is
a large gap between your projected expenses and
your anticipated income, waiting a few years to retire
and start collecting Social Security benefits may
improve your financial outlook.
If you continue to work and wait until your full
retirement age to start collecting benefits, your Social
Security monthly benefit will be larger. What’s more,
the longer you stay in the workforce, the greater the
amount of money you will earn and have available to
put into your overall retirement savings. Another plus
is that Social Security’s annual cost-of-living
increases are calculated using your initial year’s
benefits as a base–the higher the base, the greater
your annual increase….Stay tuned for more blogs in the weeks to come!!Continue reading
Is 62 your lucky number? If you’re eligible, that’s the earliest age you can start receiving Social Security retirement benefits. If you decide to start collecting benefits before your full retirement age, you’ll have company. According to the Social Security Administration (SSA), approximately 73% of Americans elect to receive their Social Security benefits early. (Source: SSA Annual Statistical Supplement, 2013)
Although collecting early retirement benefits makes sense for some people, there’s a major drawback to consider: if you start collecting benefits early, your monthly retirement benefit will be permanently reduced. So before you put down the tools of your trade and pick up your first Social Security check, there are some factors you’ll need to weigh before deciding whether to start collecting benefits early.
What will your retirement benefit be?
Your Social Security retirement benefit is based on the number of years you’ve been working and the amount you’ve earned. Your benefit is calculated using a formula that takes into account your 35 highest earnings years. If you earned little or nothing in several of those years (if you left the workforce to raise a family, for instance), it may be to your advantage to work as long as possible, because you’ll have the opportunity to replace a year of lower earnings with a higher one, potentially resulting in a higher retirement benefit.
If you begin collecting retirement benefits at age 62, each monthly benefit check will be 25% to 30% less than it would be at full retirement age. The exact amount of the reduction will depend on the year you were born. (Conversely, you can get a higher payout by delaying retirement past your full retirement age–the government increases your payout every month that you delay retirement, up to age 70.) Stay tuned for more on this topic in the weeks to come!!Continue reading