Retirement Planning and Social Security

Most Americans, to at least some extent, will be relying on this Federal program in their later years. Many Americans are not saving enough for retirement, and will be working, either full or part time, several years into what used to be considered the “retirement years”.

For 2013 the Social Security retirement system provides a maximum benefit of $2,533 at full retirement age (for those attaining age 66 in 2013), for someone with 35 years of maximum contributions. For 2012 the maximum contribution is made for someone with $113,700 in Social Security taxable income.  The annual report is sent only to those over 60 and the rest can only find it  online now.  It shows estimates of our SS income based on starting benefits at several different ages.  Be aware that it assumes we continue to earn the same amount each year that we did last year until we start drawing the benefit.  It will use our best 35 years adjusted for inflation.  The computation of benefits is complex.  Part of the 35 year average is multiplied by .9 percent to arrive at a base amount of about $700 per month for most workers.  The next two portions are multiplied by different percentages, and the sum is the monthly benefit.

Social Security income can provide a very safe, but basic source of income for our retirement years.  It can be considered to be an automatic conservative diversification investment device used in conjunction with supplementary investment strategies.  When to begin receiving benefits depends on many factors.  Each year that the benefit is delayed between 62 and 70 results in an increased monthly amount of 8 percent.  See a CFP, for retirement planning, for the best result.

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