Subscribe

Three numbers to know about Social Security

There are three numbers you need to know about Social Security – besides your actual Social Security number, of course.

  • close
    The Social Security Administration's main campus is seen in Woodlawn, Md. Besides your actual Social Security number, you should know three other numbers that involve it.
    Patrick Semansky/AP/File
    View Caption
  • About video ads
    View Caption
of

What if someone told you that you could have a guaranteed income stream with inflation protection to help meet your retirement needs? You’d probably be interested. Guess what? You already have this — it’s called Social Security.

For many people, Social Security has become an afterthought when it comes to their retirement plan. They’re more focused on their 401(k) and IRA accounts and trying to beat the markets every year. This is largely due to misunderstandings about how the system works. Here are some key facts about Social Security, along with three numbers that are very important when planning for your own retirement.

35

This is the number of years that count toward your Social Security benefits. To calculate your benefit, Social Security looks at your income in your 35 highest-earning years. If you worked less than 35 years, then any “missing” years will count as zero. Continuing to work and replacing years of lower or zero earnings can prove beneficial when calculating your future benefit. It also pays to periodically check your earnings history to ensure that Social Security has accurate records.

Recommended: Seven states with the lowest taxes for retirees

62

This is the earliest age at which most workers can claim Social Security retirement benefits. The important thing to remember is that claiming benefits before your full retirement age will substantially reduce your monthly benefits — and potentially your spouse’s as well. For people who are not optimistic about living a long life or who need immediate income, starting benefits at age 62 might make sense. For others, the advantages of waiting can be substantial.

8%

For every year you delay benefits past your full retirement age, you will receive an 8% bump in your benefit until age 70. Your benefits would also be adjusted annually for the cost of living, possibly giving you greater incentive to delay.

Of course, there are variables involved in the decision on whether to start benefits. They include the opportunity cost of not receiving and investing benefits at age 62, as well as the chances of dying prematurely. That being said, the decision to delay a few years and receive a guaranteed, inflation-protected increase can reap tremendous benefits for most couples.

Now that you have a better understanding of how Social Security works, it’s time to do some proactive planning. A great place to start is the Social Security website, where you can review your earnings history and benefit summary. Determining the optimal strategy for a couple can be confusing considering that there are thousands of options. Work with someone who incorporates Social Security optimization into financial planning strategies. Does your current financial advisor do this?  Protecting your family against unexpected inflation, down markets and longevity should prove beneficial when putting your plan together.

The Christian Science Monitor has assembled a diverse group of the best personal finance bloggers out there. Our guest bloggers are not employed or directed by the Monitor and the views expressed are the bloggers' own, as is responsibility for the content of their blogs. To contact us about a blogger, click here. To add or view a comment on a guest blog, please go to the blogger's own site by clicking on the link in the blog description box above.

About these ads
Sponsored Content by LockerDome
 
 
Make a Difference
Inspired? Here are some ways to make a difference on this issue.
FREE Newsletters
Get the Monitor stories you care about delivered to your inbox.
 

We want to hear, did we miss an angle we should have covered? Should we come back to this topic? Or just give us a rating for this story. We want to hear from you.

Loading...

Loading...

Loading...

Save for later

Save
Cancel

Saved ( of items)

This item has been saved to read later from any device.
Access saved items through your user name at the top of the page.

View Saved Items

OK

Failed to save

You reached the limit of 20 saved items.
Please visit following link to manage you saved items.

View Saved Items

OK

Failed to save

You have already saved this item.

View Saved Items

OK