By Ervis Burda and Alma Rojas
For more than 87 years, Social Security benefits have been the financial bedrock for millions of American families. The Social Security Act, first signed into law by President Franklin Roosevelt after the Great Depression, created a safety net not only for the elderly but also for low-income families, children, and unemployed and disabled adults. April is National Social Security Awareness month, the perfect opportunity to find out how to maximize your retirement benefits and be better prepared for the future.
1. Who receives social security benefits?
When we think about Social Security, we typically have retirement benefits in mind. However, the Social Security Administration (SSA) manages several programs. Retirement benefits are indeed the biggest part (approximately 80%), but SSA also provides benefits for disabled workers, as well as benefits for survivors and minors in cases where a working parent or spouse passes. These disability and survivor benefits are crucial for many American families, and in our current context, after a pandemic that has left hundreds of families broken, this becomes even more evident.
2. How can I maximize my retirement benefits?
You will be able to receive Social Security benefits in the future if you have enough work “credits” (40 credits to be exact). For 2022, you can earn 1 credit for every $1,510 you make (defined as covered earnings) and each year you can get up to 4 credits. To receive the maximum number of credits a year, you must earn at least $6,040 (or $1,510 X 4). By the same token, a person who accumulates 4 credits each year will be eligible for Social Security Benefits in 10 years. The monthly social security amount you will receive is based on the 35 highest earning years, thus, earning more income and staying in the workforce longer results in a bigger monthly benefit.
- Tip: Covered earnings don’t just include being on a payroll or having a W-2. Independent contracting, self-employment, and even cash work, all count for accumulating credits–but you must report these earnings in your taxes to get credit!
3. How do I know how many credits I have?
The best way to know where you stand is by creating an online my Social Security Account. There, you can view your reported earnings records, get personalized retirement and/or disability benefit estimates, and explore how your monthly benefit would change under different scenarios, like working additional years or delaying benefits.
To create an account, you will need access to the internet, your email, and phone. You will also need to provide SSA with personal information and verify your identity. The whole process should take about 15 minutes.
- Tip: Try not to use a public computer when you create your account and do not share your username and password with others!
4. How do I know how much money I need to retire?
Use the information in your my Social Security Account in combination with online retirement calculators, such as NerdWallet’s or Bankrate’s calculator, to determine how much you need or would like to save in other retirement saving vehicles. These accounts can include your employer’s 401(k) or 403(b) plan, and/or your own traditional IRA or Roth IRA accounts.
Depending on your assets and savings, you may also want to reach out to a certified financial planner for higher-level advice (check out this guide on how to choose a financial advisor from the Consumer Financial Protection Bureau).
- Tip: the best time to start planning and saving for retirement is today. The sooner you start planning, the better! If you need assistance, reach out a NYLAG financial counselor who can help you begin this conversation.
5. When should I retire?
You can retire and start receiving Social Security benefits as early as age 62, or wait until age 70.
However, applying for benefits early means you will receive a lower benefit amount (up to 30% less). The longer a person waits to receive benefits, the higher their benefit amount. Why? If you retire early, you will receive benefits for a longer period of time than if you retire later, and Social Security has to ensure your benefits are adjusted to last longer. If you want to learn more about this, check out this article from Charles Schwab.
- Tip: The decision on when to claim benefits will depend on your specific circumstances, your needs, resources, and ability to work, among other things. Check out this article and video for more information.
Still have questions?
NYLAG Financial Counselors can help you navigate your benefits and create a plan to secure a financially stable future.
- If you are currently working with a NYLAG financial counselor, reach out to them now to discuss your goals and saving options.
- Connect with a NYLAG financial counselor.
- Call our NY COVID-19 Legal Resource Hotline with a legal concern related to COVID-19.