7/20/2012 7:51 PM ET|
What you'll get in Social Security
Whether you’re years or decades away from retirement, here’s what you need to know about what you can expect from Social Security. Plus, tools to plan ahead.
Despite what you've heard, Social Security isn't going to disappear.
Many younger people, and even some older ones, are convinced the retirement system's coffers will run dry before they get a chance to claim benefits.
The reality is quite different. Even if Congress does nothing to fix the troubled system, and its trust fund is exhausted in about two decades, Social Security will still collect enough in payroll taxes to pay out 75% of promised benefits at that point.
Seventy-five percent isn't ideal, but it's sure better than nothing.
The system has other problems. The surplus that Social Security has built up over the years is invested in $2.7 trillion of special Treasury bonds. As payouts exceed tax revenue, Social Security will have to start cashing in those securities. The federal government will have to find the money to make good on the bonds, and that's going to put more pressure on the federal budget.
Even if you can imagine the United States defaulting on its debts -- and few experts believe we're at risk of a Greek-style crisis -- the fact remains that Social Security collects enough in taxes from current workers to pay most of the benefits it has promised.
There are a number of ways to fix Social Security so it could pay everything it has promised. One way would be to raise payroll taxes by 0.9% on both workers and employers. Another would be a series of smaller changes, which were recommended by a bipartisan Debt Reduction Task Force, including gradually increasing the full retirement age, slowing cost-of-living increases, slightly reducing benefits for top wage earners, boosting the amount of earnings subject to the payroll tax and bringing some newly hired state and local government workers into the system.
Creating private investment accounts, as some have suggested, wouldn't resolve the funding gap. What it would do is change the nature of the Social Security program, which was conceived as an insurance program, not an investment scheme. For those of us without traditional pensions, Social Security is the one part of our retirement income that we can't outlive or lose in the stock market.
To see what the Social Security system has promised you, you'll probably need to go online. Social Security used to send annual statements to every worker that included that person's earnings record over the years as well as how much he or she was estimated to receive in retirement. The system suspended the mailings to save money but has since resumed sending statements to workers 60 and older who haven't yet started to receive benefits.
Everybody else needs to:
Go here and create an account. The Social Security Administration uses Experian credit bureau data to help verify your identity, so in addition to your name, address, birth date and Social Security number, you'll need to answer some multiple-choice questions about data included in your Experian credit report. (If you've ever gotten your free credit reports online through AnnualCreditReport.com, you'll be familiar with the type of questions asked.)
Explore your benefits. Once you've created your account, you'll see your promised benefit at "full retirement age." That age, which used to be 65, has been inching up. This year, it's 66. It will rise to 67 for those born after 1959.
You can click on the "estimated benefits" link to get a fuller picture. The next tab will show you how much you can earn if you delay retirement to age 70; your benefit will rise 8% each year you delay. You can also see the lower amount you're scheduled to get if you retire early, at age 62. (More on that in a minute.)
Social Security is more than just a retirement system, of course. You also can see what monthly benefit you'd get if you were severely disabled and couldn't work. Further down, you'll find what your spouse and children would receive if you died.
If you're married, compare your estimates with your spouse's. The lower-earning spouse is entitled to up to half the higher-earning spouse's retirement benefit, if it's greater than his or her own -- something known as spousal benefits. If, for example, your wife would be entitled to $2,000 at full retirement age and your own check would be $750, you could opt to take half of her benefit ($1,000) instead. That would make your household benefit $3,000, rather than the $2,750 you two would get based on your own earnings records. Your spousal benefit would be reduced permanently if you applied before your own full retirement age, however.
The higher-earning spouse must have applied for benefits before the other can claim spousal benefits, but the higher earner has the option to "file and suspend" -- file for benefits, so his or her spouse can claim spousal benefits, and then suspend the application so that his or her own benefits can continue to grow.
If you're divorced, you probably won't be able to compare estimates with your ex. But if the marriage lasted at least 10 years, you should be able to qualify for spousal benefits based on your ex's record if you aren't remarried by the time you reach retirement age. Your ex needn't have started benefits for you to get a spousal check, but he or she would need to be old enough to qualify for retirement benefits (at least 62). You can read more about divorced spouse's benefits here.
AARP has a free calculator that can help you determine the best time to file for benefits. If you want to fiddle with the numbers and assumptions a bit more, for $40 you can try the Maximize My Social Security calculator, created by economics professor and author Laurence J. Kotlikoff.
VIDEO ON MSN MONEY
Liz is suggesting something that the Trustees have never said. She has turned the word probably into will. They have said that Social Security probably would collect enough to pay out 75% of the benefits provide the economy is good. All of this assumes that future workers will pay more in taxes, get less, while having to pay more in parental support.
If SS was only used for it's originally intended purpose and use.. we would not be in this situation. Let's go back to the real purpose of SS and fix this mess
Why in the hell did the republicans & democrats & the Obama administration reduce the SS payroll deduction fron 6.2% to 4.2% ?
At a time when they (all of them) will tell you there are problems with social security.
does that make any sense?
Just bring manufacturing jobs back to USA......Just stop CONGRESS from looting Trust Funds (SS, CSRS, FSRS..etc), and stop the waste, fraud, and abuse...and SS will be fine!!!.
..all this otherr talk is NONSENSE!!
What a bunch of BS this article is . Investing in treasury bond??? That is Dem speak saying we spent your money. The govenement does not hold their own bonds just as you do not loan yourself money.
Keep up the propaganda MSNBC the are enough weakminded braindead idiots on your side that will swallow this whole
Why do some people insist on putting their lonely lives on display on a comment board that nothing to do with Social Security? All you people that continue to put this "JUNK" for other people to be bothered by your insecurities or your lonely lives, PLEASE STOP!!! I for one am not interested in the "CRAP" that you insist on putting on the Comment Board!!!
Must be time to re-elect barry cause MSLSD is running stories on how unsafe nuke plants are but how safe your Social Security is. You keep believing that you young peeps, but with 10,000 of us boomers retiring a day, yea a day. And we are joining our parents on SS, first time that has happened with the system. Do you really think SS will be around much longer, without massive changes to it? It goes belly up by 2030 that is the government estimate, and you know how good they are at that, my guess is take it down 5 years to 2025.Oh but wait it has promissory notes, Treasury bills back by the full faith and credit of the US government stored in West Virgina. And since we are only 16 trillion in debt, we should have not problem paying for them either.
Copyright © 2013 Microsoft. All rights reserved.
Quotes are real-time for NASDAQ, NYSE and AMEX. See delay times for other exchanges.
Fundamental company data and historical chart data provided by Thomson Reuters (click for restrictions). Real-time quotes provided by BATS Exchange. Real-time index quotes and delayed quotes supplied by Interactive Data Real-Time Services. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by SIX Financial Information.