A Social Security retirement plan might not be something you have given much thought to if you aren't near retirement age. But even if you are decades away in your 20s and 30s, planning a Social Security retirement strategy that includes a backup plan and other types of investments can add thousands of dollars to your overall nest egg. With the right investments in place, you can retire comfortably with financial security. Researching your expected benefits and eligibility several years in advance can also help you develop a strategy that maximizes your return, giving you the greatest peace of mind as you enter retirement.
Social Security is a federally run, mandated insurance program that was introduced under President Roosevelt to give seniors a basic level of income when they retire. This program is increasingly considered to be a supplement to your private retirement funds since most people would have a difficult time surviving on these benefits alone. The money you set aside through savings, 401k accounts and other types of retirement investments will comprise your overall income once you retire. You might also receive a government or company pension if you have been employed in certain positions, such as a social worker. You can receive Social Security retirement benefits as well as your pension.
Since the Social Security retirement plan is funded through income tax, you are likely already planning for your post-employment future whether you realize it or not. The next time you get your paycheck, examine your withheld taxes. The amount you contribute each month to Social Security retirement is based on a percentage of your income. The benefits you will eventually receive when you retire will therefore also depend on how much you contributed.
The age at which you can start receiving Social Security retirement benefits varies depending on the year you were born. If your birth year is between 1943 and 1954, you can start collecting your full Social Security retirement check when you reach the age of 66. The age at which you can legally receive your full benefits steadily increases until 1960. Anyone born after this date must wait until they are 67. This doesn't mean you can't receive some benefits if you retire early, however. Early retirement can begin at age 62 no matter what your birth year is. You simply receive a reduced amount until you reach your full-benefits age.
You can determine the Social Security retirement benefits you will likely receive using an online calculator. Several calculators are available, ranging from simple varieties that use only your age, current income and target date to receive benefits, to detailed calculators that are based on your official Social Security statement. As a simple example, Mary wants to retire in seven years. She is currently 56 years old and earns $60,000 as a marketing executive. Using a simple calculator, which accounts for 2 percent inflation so she doesn't have to research her past earnings, she calculates that her benefits will be $1,226. If she waits until she is eligible for full benefits, in her case at 66 years and 2 months, she will receive $1,739 a month. If she delays retiring until she turns 68, she will receive $2,060 each month. Generally speaking, the longer you wait to retire, the higher your benefits will be.
Since you will almost certainly need other sources of income than Social Security once you retire, you will want to consider other savings options while you are young. A professional financial advisor can help you determine the best investments for you based on your age, income and desired standard of living once you retire. A common complement to Social Security is a 401k plan. Typically offered through your employer, this plan will deduct a set amount each month from your paycheck and deposit your contribution into a diversified investment account from a vendor that you can choose. Some employers will even match your contributions up to 100 percent. You can legally contribute up to $16,500 a year to your 401k plan until you reach 50 years of age. At this point, you can also make "catch up" contributions of $5,500 for a total allowable annual contribution of $22,000.
A financial advisor will be able to help you determine what other kinds of investments will be right for you, whether it's stocks, bonds, mutual funds or a combination of different strategies. Fortunately, you don't need to decide how to supplement your Social Security retirement benefits on your own. Finding a local financial advisor whom you trust can take much of this burden off your back, allowing you to focus on planning your dream retirement with the peace of mind that you will have enough in savings to live comfortably.
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