In August, First Financial’s Investment and Retirement Center held a consumer seminar titled Social Security and Your Retirement. The presentation was lead by Eric DiBraccio the Regional Sales Director at MEMBERS Insurance & Investments. For those of you who couldn’t attend the seminar, here is a recap of what was covered during the seminar. Regardless of when you plan to retire, Social Security will likely be an important part of the road ahead and we want to make sure you’re educated and prepared so you can enjoy your retirement years!
Just some facts about Social Security…
- Established in 1935 during the Great Depression and designed to help alleviate the problems of poverty for senior citizens
- Roughly 75% of all retirees are receiving reduced Social Security benefits
- Only 66% of workers remember ever receiving or reviewing a Social Security statement
- Only about 33% of employees visit with a financial professional for help understanding the role of their Social Security benefits
- Steady Income: Social Security provides you with a regular retirement income, delivers an amount you don’t have to guess at and offers you the comfort of a “retirement income check” to replace your “working paycheck”.
- Income for Life: Social Security is one of the few sources of income you can’t outlive and the longer you live, the more money you receive from the Social Security system.
- Spousal and Survivor Benefits: A spouse who didn’t work and earn any Social Security on his or her own can receive up to 50% of their working spouse’s benefit. After one spouse dies, the survivor can receive the greater of their spouse’s or their own benefit and dependent children may also be entitled to benefits.
- Eligibility: You become eligible for Social Security benefits by working in a Social Security covered job for a minimum of 10 years. The typical threshold is that you must have 40 credits to be eligible (4 credits a year by earning a minimum dollar amount). Once those 40 credits are earned, you are insured under Social Security and your benefits are based on your earnings history not credits.
- Insurance Amount: The formula consists of your 35 highest years of earnings and fills in missing years with $0. Divided by 35 for an average then divided again by 12 for Average Indexed Monthly Earnings (AIME), then finally a 3-part formula is applied to your AIME to determine your Primary Insurance Amount (PIA).
- Full Retirement Age: If you were born in 1937 or prior to, your full retirement age is 65 as well as those born between 1938-1942. 1943-1959 you must be 66 and 1960 and later you must be 67.
- Start Date: Anyone can start receiving benefits as early as 62 but if you do start before your full retirement age, your benefit will be reduced and that reduction will continue for life and will not go up one you’ve reached your full retirement age.
- Spousal Benefits: Your spouse is entitled to receive up to 50% of your benefit and would still claim their own benefit if it was higher than their spousal benefit.
- Survivor Benefits: At death, a survivor can switch and receive the benefit for the spouse who has passed if it’s higher than their own. The survivor must be at least 60 for reduced benefits, but survivor benefits are not available for same-sex couples. The couple must be married for at least 9 months before benefits will be paid and ex-spouse benefits are also available if the marriage lasted for more than 10 years.
- Earnings Test: The maximum amount you can earn before benefits are withheld is called the earnings test and the amount is adjusted each year for inflation. Up until the year you reach full retirement, for every $2 you earn over the earnings test, Uncle Sam will withhold $1.
- Pension Income: If you receive a pension from a former employer, your Social Security benefits are not affected as long as you contributed to Social Security while at that job (including IRAs and 401(k) plans).
- Taxation: Your Social Security benefits may be taxable depending on how much other income you earn.
- Inflation Adjustments: Cost-of-living adjustments (COLAs) are announced each year in October for the following January. COLA is based on increase in the Consumer Price Index (CPI) from the third quarter of one year to the next and if there is a negative inflation (deflation), your Social Security benefit will not decrease.
Representative is not a tax advisor. For information regarding your specific tax situation, please consult a tax professional.
Representatives are registered, securities are sold, and investment advisory services offered through CUNA Brokerage Services, Inc. (CBSI), memberFINRA/SIPC, a registered broker/dealer and investment advisor, 2000 Heritage Way, Waverly, Iowa 50677, toll-free 800-369-2862. Nondeposit investment and insurance products are not federally insured, involve investment risk, may lose value and are not obligations of or guaranteed by the financial institution. CBSI is under contract with the financial institution, through the financial services program, to make securities available to members.