Getting the Full Benefits of Social Security.
Comedian George Burns once joked that retirement at 65 was ridiculous. “When I was sixty-five, I still had pimples.”
Whether you’re still fighting acne at 65, or counting down to your final days on the job, one thing is for certain – the age at which you retire greatly affects your social security benefits. Retirement brings with it many uncertainties. With the average lifespan increasing each year thanks, in part, to advances in medical technology, the retirement phase of our lives can last a lot longer that it did just 50 years ago.
Even if you have a generous retirement package from your place of employment, coupled with healthy retirement savings accrued over the years, social security is an important part of the retirement equation for seniors and boomers. For some, social security benefits are the bulk of the income that will be used during retirement.
Either way, when you retire has a huge impact on your social security payments, so know the facts before you choose your retirement date.
Social Security 101
Social security is hardly a new concept, but it is one that many do not think about until they are fast approaching retirement age.
“Poor” laws can be traced as far back in history as the Middle Ages. When the Pilgrims first arrived on the shores of New England on November 11, 1620, they brought with them the English concept of the English Poor Law of 1601, which outlined provisions for the state to provide for the welfare of its citizens. The Pilgrims instituted local taxation and other means for supporting its poor laws; however, the laws at that time discriminated between the worthy and unworthy, as determined by the local lawmakers.
In addition to the systems that were tried – and failed – in our early beginnings, there is another one that is considered by most historians to be the precursor to the modern social security system. Civil War Pensions were established to assist in the care of hundreds of thousands of widows and orphans, as well as injured soldiers, following the Civil War. It was considered to be far more generous than any previous military pension programs that had been offered, and its framework later was used to craft the social security system.
While America struggled to find the right system to support the poor and elderly, one of the final driving forces toward the establishment of a feasible social security program was the Great Depression, which started in earnest in 1929.
On June 8, 1934, President Franklin D. Roosevelt announced via a message to Congress his intent to establish a social security program. Through an executive order, Pres. Roosevelt created the Committee on Economic Security, which consisted of five top cabinet-level positions. The committee was tasked with studying the issue and making recommendations that would serve as the basis for legislation.
In January of 1934, the committee made its report to Pres. Roosevelt. On January 17, the President introduced the report to Congress for consideration. Hearings were held, and legislation known as the Social Security Act was crafted based on the report that overwhelmingly passed both Houses of Congress.
The Social Security Administration was founded on August 14, 1935, following the official passage of the Social Security Act that was signed by President Roosevelt. Taxes were collected in January 1937 for the first time, along with the first one-time, lump-sum payments.
You can learn more about the history of social security here.
While it is essentially up to each individual as to when they collect their social security benefits, there are some guidelines that can help you to make the right choice for your situation.
First of all, no one can collect until they are of the retirement age stipulated in the social security act. At present, seniors and boomers can only collect 100 percent of their social security benefits at age 66. The earliest that social security benefits can be collected is age 62; however, if you choose to collect at that time, you will only receive 75 percent of your monthly benefits. Retiring at age 65 will earn you 93.3 percent of your monthly benefits.
If you are unsure at what age you should retire, but know roughly how much money you need per month to pay for the necessities, using the Social Security Administration’s retirement calculators will help.
A big factor in knowing when to retire and begin collecting social security is your overall life expectancy. There are a number of things that affect a person’s life expectancy – current health status, family history, genetics, lifestyle (diet, exercise, nutrition). Be honest with yourself about how these things may affect how long you will live post retirement. For some seniors and boomer who are dealing with chronic illness or other health-related issues, early retirement at a lower percentage of your social security benefits may be a wise decision.
Men also should take into consideration the fact that women generally have longer life spans. The average life expectancy for women is 80.1 years, while it is only 73.4 years for men. If your spouse is depending on your social security benefits if you die before her, make sure to base your retirement age with that consideration in mind.
One last tip: if you are divorced, but your marriage lasted for at least 10 years, you are eligible to receive benefits on your ex-spouse’s record, even if your ex has remarried. This rule only applies under the following conditions:
- You are unmarried;
- You are 62 or older;
- Your ex-spouse is entitled to social security retirement or disability benefits; and
- The benefit you are entitled to receive based on your own work history is less than the benefits you would receive under your ex-spouse’s work record.
Learn more about social security benefits, and other financial planning tips, at the next Upside of Downsizing conference, being held on September 30 in Portland. Learn more or register for the conference here.
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