Social Security provides a safety net for eligible Americans, as they receive a guaranteed source of income during retirement. The program is funded through payroll taxes collected from employees and companies.
You start contributing to Social Security on your first paycheck and will continue until you retire. Americans can start receiving Social Security payouts as early as age 62, but it is highly recommended to wait to receive Social Security payouts as you can greatly increase your monthly allowance. It is also important to know when and how to begin collecting Social Security benefits.
Social Security is calculated by looking at all of your earnings throughout your career, and adjusting each year’s total to account for inflation. Your 35 highest-earning years, up to each year’s Social Security taxable maximum earnings, are then averaged and divided by 12 to determine your lifetime average monthly earnings.
If you have worked less than 35 years, you may want to work enough additional years so you have a full 35 years of earnings. Otherwise, the Social Security Administration will average in zeros for any years less than 35 – which will make your retirement benefit significantly lower.
While you are eligible to claim benefits as early as age 62, your monthly check could be nearly twice as much if you wait until you’re age 70. Before claiming your benefits, weigh your options:
If you are healthy and able to work, put in a few more years on the job to increase your earnings and delay taking Social Security benefits. If you work an additional three to five years, you’ll increase your social security earnings exponentially.
When you’re ready to apply for retirement benefits at age 62 or older, use the Social Security Administration’s online retirement application – the quickest, easiest, and most convenient way to apply.
As long as you continue to work, even if you are receiving benefits, you will continue to pay Social Security taxes on your earnings. However, the Social Security Administration will check your record every year to see whether the additional earnings you had will increase your monthly benefit. If there is an increase, they will send you a letter telling you of your new benefit amount.
As long as an individual’s income is greater than the maximum taxable Social Security wages in each of at least 35 years, he or she would be entitled to $2,687 per month at full retirement age, or as much as $3,547 if they wait until age 70 to claim their benefit.
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