Getting Married > Retirement Social Security: So How Do I Actually Tap That?

Team PV

“I’m guessing I’ll never even see what I put into this damn fund, but sure, tell me about it anyway.”

And if ya don’t know, now ya know: Social Security is more than just a deduction on your paycheck. It’s a government benefit that aids retirees, people with disabilities, and families of disabled or deceased workers. It’s funded by your payroll taxes (also called FICA taxes) and put in a Social Security pot, if you will; your grandparents, disabled aunt, or your widowed neighbor and her kids all get served their monthly payments from this pot. When you reach retirement age, you’ll dip into that same Social Security pot for your benefits and your grandchildren will likely be the ones filling that pot with their FICA taxes. (So give them that extra piece of candy when they ask for it.)

Though eligibility age will no doubt change by the time you reach retirement, here’s where it currently stands:

- You can start receiving benefits at age 62, the earliest age to claim benefits, but you might not want to. Because you’ll be claiming benefits for a longer time, the Social Security Administration (SSA) reduces your claim amount by 25% for your entire retirement. Ouch.

- Full retirement age refers to when you’re eligible to receive your full benefit amount. Traditionally, your 65th birthday marked full retirement eligibility. But since Americans are living longer, the SSA lets you celebrate full retirement on a graduated scale: if you were born between 1943 and 1954, 66 is your full benefit age; for anyone born in 1960 or later, your full retirement age is 67. 

- However, you’re not required to retire at 67; in fact, the SSA will reward you for your patience. For every year you delay retirement – up to age 70 – you could receive 8% more in benefits each year. So if your full retirement age is 67 and you delay claiming until you reach 70, your benefits jump 24%. Booya! 

The SSA takes your 35 highest income-earning years to calculate your monthly benefits, or your Average Indexed Monthly Earnings (AIME). Currently, the average benefit check is around $1,335 a month; the maximum monthly benefit is $2,663. If you live in a small town in the Midwest, this might be enough to scrape by; but if you live in a major metropolitan area, this amount may barely cover your rent.

Needless to say, relying solely on Social Security checks may not be a sustainable or comfortable way to retire. And Social Security may not exist as it does in its current form: as it stands, there are more outgoing payments than incoming funds. Start saving early and you’ll hopefully amass a nice pile of cash in your 401(k) or IRA (link) that you can Scrooge McDuck-leap into.


Photo: The Nick Page

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