Discover Your Future Social Security Benefits – Part 2

In Part 1 of this series (see link below), I showed everyone the steps that you can take to request a copy of your future estimated Social Security benefits, free of charge, from the government.
As I mentioned towards the end of the the Part 1 posting, I just received my Social Security benefits statement today, June 4th. Now that I have had a few minutes to peruse through it, I wanted to share several learnings from reviewing my statement.
Current Social Security situation

It is refreshing to learn that in the Social Security statement that I received, the government is very upfront about the problems and perils facing the Social Security system. Listed below are several highlights.
  • Today, Social Security is the largest source of income for most elderly people. This is sad to hear.
  • Social Security was NEVER intended to be a sole source of income for people, as it is being used today. The statement strongly encourages people to save their own funds to live off of and use Social Security as a supplement.

How are retirement benefits calculated?

To get retirement benefits, you need to have accumulated 40 “credits” of work throughout your lifetime. 
What exactly is a “credit” of work? A credit is awarded for every $1,120 of earned income you receive. 
  • My Social Security statement lists that I have accumulated 19 credits at this time, and therefore, do not qualify to receive any retirement benefits yet.

Other Benefit Quantities Listed

In addition to retirement benefits, disability, family survivor, and Medicare benefits are listed on the Social Security benefits statement as well.
  • Currently, I do have enough credits (with 19) to qualify to receive disability income. If I were to become disabled right now, I would receive $1,485 per month in disability income.
  • Additionally, I have accrued enough credits to qualify for a total of $3,315 per month of family survivor income, if I were to die right now.
  • In order to get Medicare, you have to have accumulated at least 40 credits from earned income, and be 65 years old.
    • Since I do not fall in to either of those categories, I am not eligible for this.
A really cool thing that is also listed on your Social Security basics benefits statement is a record that the government keeps of your income each year in a section called Your Earnings Record. It is just kind of cool to see what the government keeps on record!

How is the future of Social Security looking?

Listed below are the future estimates for Social Security listed in the statement I received.
  • In 2016, Social Security will begin paying more out in benefits than we collect in taxes. 
    • Just as a reminder, Social Security is paid as a part of your taxes from your paycheck. 
  • Without changes, by 2037 the Social Security Trust Fund will run out! Awesome!
  • Additionally, in 2037, Social Security will only be able to pay out 76 cents of every Dollar of scheduled benefits.

What is the government doing to extend the life expectancy of Social Security?

To remedy the problem of Social Security running out, the government is, in short, raising the normal/full retirement age.

The table at the link below shows the different full retirement ages, according the year in which an individual was born. – Ages At Which You Are Eligible To Receive Social Security

If you are like me, and was born after 1960, the full retirement age is now 67 (even though you can begin receiving Social Security benefits at a discounted/reduced rate at age 62, no mater when you were born).

How should this be used in personal finance planning (for retirement, etc)?

Based on the forward looking statement above about Social Security strategies, I am definitely not going to plan on needing Social Security when I retire. While I do believe that Social Security will always be around, I doubt it will be enough to live on during retirement without other principle income sources.
Keep on learning!
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