Listen up! It doesn’t matter whether you’re soon-to-retire or not-even-close – social security is a retirement saving strategy that you want to understand (and keep) in your retirement tool box.
In this post, we tell you what it is, how it works, and why it matters to know at any age (really, if you are 65 or 32 or 21 or 45 – ANY AGE!)
…Including the answer to the question: does everyone get social security when they retire?
PS: if you’re still working on your retirement tool box or have no idea where to begin, start with the free penny money quiz. it’ll tell ya. ;)
👀 4min read
📸: Baddie Winkle
The "Social Security Retirement benefit" (as the government calls it) is a monthly check that replaces part of your income when you retire and/or reach retirement age.
It’s also a way for the US government to “force” you to save for retirement.
Money you've earned over your lifetime is auto-magically taken out of your paychecks, and put into your social security account.
This year, it’s expected to grow at a record rate of 8.7% (whether you are taking social security or not) thanks to inflation and cost of living.
Pretty much, yes! About 97% of people in America will receive social security benefits.
Throughout your career, whether you worked for a big company, a startup, or even yourself, there’s a good chance you paid into social security.
For salaried employees, 6.2% of your paycheck (up to the taxable maximum, which was $147k in 2022) is auto-transferred into your social security account.
For self-employed folks, it’s 12.4% -- lucky you! (it’s to catch financial nuances like this that we created a penny module just for you.)
You can look up how much is in your social security account at ssa.gov.
One thing to note: You can't increase or decrease these numbers. Same as tax brackets and percentages, they are set and locked by Uncle Sam.
First, the government determines your "full retirement age". Then, once you hit that year, that’s when you’re allowed to take your full benefit.
This retirement age is different for everyone. It could be 66 and 6 months, or 66 and 8 months, or even 67.
You can use this tool at ssa.gov to figure it out.
Want to cash in early? You can take it up to 1 year earlier than your retirement age, but it'll be a reduced amount. :(
Want to save it and let it grow? Totally fine, you'll have more later.
If you don't want to take it yet, you can leave it be. (Just don’t forget about it, k?)
Why does it matter? This money is YOURS for retirement! It could impact how much you need to save for tomorrow, or how much more you’ll have to spend today.
Also, social security is NOT a “free lunch”.
You may pay federal income taxes on your benefits if your combined income (aka, 50% of your benefit amount plus any other earned income) exceeds $25,000/year for individuals, or $32,000/year filing jointly.
How you pay is up to you: you can pay the IRS directly or have taxes withheld from your payment.
Even with tax, it’s still more money in your pocket at retirement, and worth having in your retirement tool box (along with your 401ks, IRAs, and so on.)
The amount of social security cash you get will vary per person.
You can look it up at ssa.gov. (aka, the United States Social Security Administration office.)
Your social security profile will tell you:
As mentioned earlier, social security is going up 8.7% in 2023!
No, that doesn't mean the government is going to take MORE out of your paycheck.
What the 8.7% increase really means:
The amount that they have already taken out of your paycheck and set aside for retirement is going to grow at an exponential 8.7%. WAHOO!
For comparison: interest rates in most high-interest (or high yield) savings accounts vary between 2-4% – so you’re getting at least double with social security!
To sum it up:
Of course, if you need help any step of the way: we’re here for you!
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