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
speaking of the economy i say go to we the people where i have created a petition because of these financial issues our country face.
Here's some more information about this petition:
Reform Social Security To Allow All Who Have Completed Their
Quarters To Withdraw Their Monies (All or Partial) Untaxed!
One of the great injustices in the SS system is the fact that so many receive 'disabled"
benefits which are tax free and are given out like candy at a party while those who play
straight have to pay taxes on their SS payment at a preset level. While the truly disabled
should be cared for, a majority can be seen on the golf courses and other recreational
sites enjoying their misbegotten payments while others have to face the burden of
paying double taxes on original "contributions" and then on SS payments in their
retirement. There is no justice in the system.
Here is the truth about social security:
There is no social security account with "your money" in it. Everything you've paid in has already been spent by the government.
Social Security isn't really funded by Social Security taxes, at least not on the margins. It's funded by general revenue, borrowing, and Federal Reserve printing just like everything else.
Congress has repeatedly hiked the tax from 1 percent originally to 7.65 percent in 1990 which is the current level even though it was temporarily reduced to 5.65 percent in 2010.
Almost every year since 1935 Social Security ran a surplus with more people paying in than withrew. Those surpluses, about $2.5 trillion at the end of 2010 consituted the "trust fund", but Social Security bought "special issue" securities with those surpluses and loaned every spare dime it had to the U.S. government. Social Security can only sell these "special issue" securities to the U.S. Treasury. How does the U.S. Treasury pay for them? By borrowing and taxing.
As a result, the trust fund has no money in it. It is filled with IOUs whereby the federal government owes itself. In other words, there is no Social Security trust fund. Social Security is broke.
Since there is no "fair" answer, everybody will suffer. Some wil suffer more, but the Social Security tax should be abolished with the program funded through general tax receipts and possibly a national sales tax. The least needy recipients should be removed from the rolls until it shrinks down to nothing through means testing.
This would free up a total of 15.3% of tax money ( half funded by the worker and half funded by the employer) and all workers would have roughly 7.5% of their income to save, spend or invest which they didn't have before. The employer would have the same amount to invest in capital, hire or put back into retained earnings.
It's so interesting to hear all of these theories and suggestions to "fix" social security.... "Why can't the congress do something about it"......Well, it's unlikely that the congress will EVER do anything about it because THEY aren't in the social security umbrella. They're under a different and more lucrative program and if they were to attempt to make the program more equitable, the first thing that they would need to do is repeal the program they have and put themselves into the same basket of benefits that the average American citizen is under.
If you think that's going to happen anytime soon, you are fooling yourself. Yet, nobody in either House of congress would even suggest it.
Social Security was only meant to supplement your retirement it was never meant for people to try to live on, if you have a pension or a 401k any retirement income at all Social Security was meant to make up any shortages and make sure everyone who worked has something when they can no longer work.
It should be law that all employers must pay into Social Security or a 401k retirement acc. not everyone pays into Social Security since the eary 70's 6.3% of my income has been held out of my pay check for Social Security and my employer matched that so 12.6% of a persons income goes into the system. most people don't relise the payroll taxcut is taking money away from Social Security by cutting that 6.3% to 5.3% or from 12.6% to 10.6%. at the very time when babybomers are going to retire in droves if anything we need to increas it to 7%. Papa Brooks
This is why we need the FAIR TAX LAW... It has been on the books for years.. Again.. it is a way for every one to PAY THEIR FAIR SHARE.. EVEN THE ****s.. GOOKS... DOT PEOPLE...
JUST LOOK IT UP.. It is the best thing since sliced bread! That means that the so called middle class,(aka new poor in this country) will get some help from all the the sponges in this country including Big Money!
why is it they change your post, even when you do not use a cuss word? REALLY "EVEN WB MEXICANS! WILL HAVE TO PAY THEIR FAIR SHARE!
The problem is the PEOPLE OF THIS COUNTRY, that is what is wrong with every thing.. The ones that keep voting for the same old timmers that that lied, lied and lied some more.
Then you have the ones who cry, cry and cry some more.. But NEVER VOTE!
Now look what we have Two LIARS, BIG MONEY AT HEART running for the President..
Then you have the so called TEA PARTY... that is suppose to make a different.. WHAT HAPPENED.. WHEN OBAMA CARE WAS PASSED? WHAT HAPPENED WITH Obama gives himself full control of the media, tv.. etc...
Sorry folks, but the AMERICAN PEOPLE ARE THE ONES TO BLAME.. TO BUSY RUNNING THE ROADS, WORRYING ABOUT WHAT SOME ONE MIGHT SAY ABOUT THEM, OR KISSING AS* BECAUSE THEY ARE SCARED TO MAKE A DIFFERENCE..
WHAT A FREAKING SHAME...
we should be given the choice to privatize. you want to still invest in the broken system go ahead keep it but let me have the choice. we should be given a choice, i don't want to take away your SS but I want to be given a choice. I'm 35 now and would give up all I put in if given the choice to quit paying now and investing my own money. you can even keep the portion my employeer pays. let them keep paying that portion till I die, just give me my own money to invest in how I see fit.
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