Will Social Security be there for me when I retire?
My Social Security
Social security is an important component of retirement planning. As such it is a good to question its sustainability.
First off, since social security is important it’s a good idea for you to create an account to monitor and utilize the resources afforded to you from the social security website.
The government’s social security website give you the option to sign up a profile called my social security.
You can sign up for your my social security account by going here.
I highly recommend you to sign up and regularly monitor your earning history. You don’t have to take my word for this. See the Youtube video below from personal finance expert Suze Orman.
With your free, personal my Social Security account, you can receive personalized estimates of future benefits based on your real earnings, see your latest Statement, and review your earnings history. It even makes it easy to request a replacement Social Security Card or check the status of an application, from anywhere!SSA
How my Social Security Benefits is Caculated?
Your monthly income social security benefit is calculated by taking the average of 35 highest-earnings years of your work history.
Social security uses a system of credits that you will get by working and paying social security taxes. In order to qualify for benefits, you need to have a work history of at least 10 years.
For 2020 the maximum monthly amount is $3,011. You can boost your benefit by waiting until your full retirement age, which is 66 or 67 depending on the year that you are born in.
If you claim your benefit at age 62 the earliest age you can claim. you will forfeit 25 percent of the money. If you wait until at age of 70 you can boost your benefit by 8 percent. There is no financial incentive past the age of 70 years old.
Funding Social Security
American workers pay 6.2 percent of gross wages up to $137,700. So the most an individual employee pay is $8,537.40. The tax is known as the Federal Insurance Contributions Act FICA.
Contributions are matched by employers.
Self-employed workers pay 12.4 percent of the net earnings.
Additionally, 1.45 percent of your gross wages help fund Medicare. There is no income maximum for Medicare taxes. Employers match this as well.
Another source of revenue comes from the taxation of social security benefits.
- 89 percent from FICA or SECA (self-employed individuals)
- 3.4 percent from income taxes on Social Security recipients
- 7.6 percent from an interest in the trust funds ($2.9 trillion at the end of 2019)
Maximum Monthly Social Security Benefit
For 2021, the maximum social security benefit a person can receive per month is $3,895 for someone who claimed their benefits at age 70.
At full retirement, the maximum benefit amount is $3,113 and for someone who claimed benefit at the age of 62 is $2,324.
Per year that comes out to be $46,740, $37,356 and $27,888.
How Long Will Social Security Last?
The Social Security administration project that there is enough money saved to pay benefits at the current rate until 2035.
What happens after 2035? After this date, benefits will likely be reduced if the system is not improved.
The projected cuts by 2035 could be up to 21% to keep payments up through 2092.
There are currently more than 63 million American receiving Social Security benefits monthly.
This number will continue to go up higher because baby boomers are reaching retirement age.
The funding mechanism in place will ensure that when you return you will get your Social Security benefits but at a reduced amount.
So the question, will Social Security benefit survive? The answer is yes! As long as people continue to work and the money in the trust fund is continually replenished then Social Security will not be bankrupt.
However, the money that you were promised may not be the amount you get when you do retire.
It’s important to not rely solely on Social Security benefits as the only source of your retirement income.