Is retirement part of your financial plan? It is never too early to think about retirement, but many people of all ages do not know where to start. Retirement is a financial goal for most people. The age you are able to retire depends on how prepared you are financially. Many people rely on Social Security benefits as a crucial part of their retirement plan. The Social Security Administration (SSA) is the government entity that oversees the Social Security Retirement benefit program.
Do you pay a Social Security tax with your paychecks?
Most employees pay a Social Security tax and the current rate is 12.4% (6.2% paid by employee and 6.2% paid by employer). Social Security is a benefit for eligible adults to replace some of their income in retirement. Eligibility is based on age and attaining enough Social Security “credits.” Typically, you need about 10 years of work with a minimum income level (40 credits) to be eligible for benefits. The age you are eligible to start drawing benefits depends on your birth year. For those who were born on January 2, 1960 or later, the full retirement age is currently 67 years old. Benefits can be drawn at a reduced rate as early as age 62. If you choose to delay receiving benefits, the benefit can increase until age 70.
What is the Social Security Retirement benefit?
The amount of the benefit you receive is based on a calculation that considers your average wages and the date you decide to start drawing benefits. If you go to ssa.gov and create an account, you can view your personal income and the contributions you have made so far. Then, you can get an estimate of what your individual payout may look like depending on when you draw benefits. According to the recent SSA Fact Sheet, retired workers received an average monthly benefit of $1,837 in June 2023. This annualizes to $22,044 per year. When considering retirement, does this sound like enough to support your planned lifestyle?
The earlier you start to think about when and what you envision for your retirement future, the more prepared you can be to start taking steps toward this goal. To check your current eligibility, review your earnings record, and estimate your future retirement benefits, create an account to access this information at ssa.gov. In addition to the Social Security Retirement benefit, there are many options for how to prepare financially for retirement. For those who are eligible, learning more about Social Security benefits is a good place to start.
Meet the Author
Jamie Mahlandt is a Financial Educator for Bond, Clinton, Jefferson, Marion, and Washington counties in Southern Illinois. She provides financial education to the local community with an emphasis on financial literacy and financial well-being.