One question that comes up a lot with Social Security is, "How is one insured or qualifies for Social Security retirement?" The answer lies in how much one pays into Social Security. The way Social Security calculates "being insured" is through one's earnings from employment or self-employment. Those earnings are looked at as credits. According to the Social Security Administration, in the year 2020 each $1,410 in earnings equals one credit. You can earn up to four credits per year. An individual needs 40 quarters throughout their work history which equates to 10 years of Social Security taxes paid in to be eligible or insured for Social Security retirement benefits.
Another question that arises is, "When can one file for retirement benefits or how early can one file for Social Security retirement?" The earliest a person can file for Social Security retirement is age 62. An individual who files early must also understand that by filing early they are locked into that benefit amount which is normally 25% less than what they would have received at 100% if they would have waited until their full retirement age which is based on your year of birth. For those who wait past their full retirement age to file up to age 70, they can see a bonus paid by Social Security of up to 8% per year. Social Security will not tell you when to file for retirement, but it is always good to consider three factors before you do. Those factors are your age, your health, and your finances.
When it comes to Social Security retirement still another question that arises is "How are retirement benefits figured?" In short, the agency looks at the lifetime of one's work and averages the highest 35 years over the lifetime of work. A calculating formula is applied to that average giving the individual the amount they are due at their full retirement age which is called the "average indexed monthly earning" or the "primary insurance amount". One way you can get a real time estimate of what your Social Security retirement may look like would be to use Social Security's online retirement estimator. It will give you an immediate and accurate estimate of your retirement between the ages of 62 and 70. Another way to estimate your retirement is by creating a my Social Security on their website. This will give you the ability to download your Social Security statement where you can view your lifetime earnings posted and estimates of your retirement, disability, and survivor benefits.
These are a few of the questions and answers you can apply to your retirement planning as it pertains to Social Security.
Do you need a plan on how to reach your financial goals whether that be budgeting, getting out of debt, saving, retirement, or building wealth? Let's Talk! Contact me at True Prosperity Financial Coaching. I can help you!
