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Social Security and Retirement

When it comes to an American nearing their retirement age and dealing with social security, it can be a very stressful and difficult process to manage. Many people do not even fully understand how the process works. To clear the confusion around it, let’s break this down.

Social Security and your retirement benefits work through taxes. Those who work for a living are required to pay Social Security taxes. The amount in which you are paying is reliant on how much of an income you are earning with your occupation. The higher income you possess, the more social security taxes you end up paying. After all your years of paying into Social Security, next comes your FRA or full retirement age. An Americans FRA is when they are completely eligible for their full retirement benefits.

For those who were born in the year 1960 or after, your FRA is set at 67 years. Those born prior to 1960 will all have separate full retirement ages. For example, if you were born in 1957 your FRA would be 66 and ½ or 6 months old. The FRA for each year from 1959 to 1955 is different by two months. 

Americans a lot of the time ask whether or not they should wait until their full retirement age to claim their Social Security benefits. The answer to this is that there really is no universal answer, it is all dependent on your personal situation. 

We advise those who are able to make it to their FRA to do so, but for some who may be struggling and do not have the ability to support themselves until they reach their FRA, claiming early is most likely the right option for you. Weigh all your options and try to wait till your FRA so you do not end up with reduced benefits. 

If you want to set yourself up to obtain as much of these retirement benefits as possible, you will have to be working for a full 35 years to do so. The way this works is the Social Security Administration takes the average income of the highest income years you have had during your years of work. 

The Social Security Administration keeps track of how much you earn each year as well. Then, your benefit is calculated based on the 35 working years when you earned the most money when you retire. (Your past wages are indexed to bring them in line with current wage levels.) To get an idea of what your benefits might be when you retire, use the Social Security retirement estimator tool.