A Closer Look At Your Social Security

On Friday, I received my Social Security Statement and looked closely at it for the first time. Although, I have been getting these statements for years, I have never paid too much attention to them until now. The reason? My mom is turning 65 this year, and I need to figure out her options.

Some Facts About Social Security

Surprisingly, the Social Security Statement contains a lot of good information. I included a few highlights here for you.

Social Security is for everyone, not just retirees. Social Security can provide benefits if you become disabled, or help support your family if you died.
Social Security is not intended to be your only source of retirement income. Social Security is meant to supplement your other sources of retirement income. You will need other savings, investments, pensions, and retirement accounts to make sure you have enough money to live comfortably when you retire. Here’s how to calculate your retirement needs.
Social Security is a compact between generations. This means working Americans who pay Social Security taxes are funding Social Security payment for retired and disabled Americans, or their dependents. So, I will be funding mom and dad’s retirement one way or another.
Social Security is in serious financial trouble. Due to our demographic, the Social Security Administration (SSA) will be paying more in benefits than they’ll collect in taxes by 2017. Without changes, the Social Security Trust Fund will be exhausted by 2041, and the administration will only be able to pay 78 cents for every dollar of benefits. Great, just when I am supposed to get paid.
Social Security benefit is based on your lifetime earnings. Your Social Security benefit is calculated based on your average earnings over your working lifetime, not how much you have paid in taxes. If you don’t report all of your income, don’t complain about low benefits.
Social Security benefit is available even if you continue to work. You can work and still get retirement or survivors benefits. However, the amount of benefit will be reduced if you haven’t reached your full retirement age.

What Social Security Means To Me

There’s a lot more information in the statement, but here are some of the key takeaways for me:

I am turning 35 this year, so I’ll the full retirement age by 2040 (assuming the Social Security Administration doesn’t increase the age). This is a year before the Social Security Trust Fund will be exhausted, so I cannot count on Social Security to supplement my retirement.
For people my age and younger, it’s even more important for us to save and invest wisely. The SSA recommends www.mymoney.gov, a federal government website dedicated to teaching Americans the basics of financial management.

What about mom?

Her full retirement age is 66, so she still has a year before she needs to act.
She needs to sign up for Medicare three months before reaching age 65 — so that means she has to apply now. I’ll be checking out www.socialsecurity.gov/applyforbenefits and www.medicare.gov today.

I found the information in the statement really useful, so I hope this short article is helpful as well. Be sure to read your Social Security Statement carefully the next time you receive one.

Here are related articles about Social Security by other bloggers:

The American Retirement Account at Cash Money Life
Learning How to Finance Your Future at Rich Credit Debt Loan
There is NOTHING unpatriotic about retiring early at Mighty Bargain Hunter

13 Comments

Curt
August 18, 2008, 11:03

My mom just started collecting SS this year, even though my father has not retired yet. She gets about $500/month, which isn’t much but it does help out. Based on my calculations, she will probably need to continue to work at least one day a week indefinitely.
Patrick
August 18, 2008, 12:58

Very good info, Pinyo. I’ve looked at my SS statements, but don’t pay them too much attention at this point (at least not the part where they inform me how much money I will receive when I receive disbursements). I know that by the time I retire, things will be very different with Social Security. So right now, I am putting away as much as possible into my retirement plans and hoping that I won’t need any support from the government. If I get it, I hope it’s just a bonus.
ToughMoneyLove
August 18, 2008, 19:31

Pinyo – For your generation, you can expect that there will be “means testing” for SS retirement benefits. If you have substantial retirement income, no SS for you. (No good deed goes unpunished by our government.) For your Mom, she will get an 8% bump in benefits for each year she delays taking SS until age 70. Definitely consider that. Where else can you get a guaranteed 8% return?
Ron@TheWisdomJournal
August 19, 2008, 10:14

Your statement that it was never intended to be a retiree’s sole source of support is spot on.
When the SS act was passed, the average life expectancy was about 67. Today it’s in the mid to upper 80’s. Result–more money paid out for a longer period of time.
The disgusting thing is that the money has been robbed and squandered by politicians. I’ll be very, VERY surprised if it remains in it’s current form when I plan to retire in 25 years at age 67.
AndyS
August 19, 2008, 13:58

Social security is going to be one of those myths in 30 years, like company pension plans are becoming now.
terry
August 19, 2008, 14:10

“For your Mom, she will get an 8% bump in benefits for each year she delays taking SS until age 70. Definitely consider that. Where else can you get a guaranteed 8% return?”
If you don’t live to 70, you would have been better off taking the benefits early.
Pinyo
August 19, 2008, 15:01

@Curt — My mom won’t get much either because she was here over 20 years ago for 2-3 years and reentered the work force with low income for a long time. Fortunately, she’ll be getting a decent pension from her current employer.
@Patrick — Thank you. I am doing the same with my retirement.
@ToughMoney — The problem with 8% increase is that you are not getting any money while you are deferring. For example, if you are entitled to $1,000 this year and $1,080 next year — by waiting until next year to get the 8% increase, you actually lost $12,000 for the year.
@Ron — Good point about longer life expectancy.
@AndyS — Agreed.
@Terry — Exactly, it’s better to get it now while you can. Not getting money for the 4 years period while waiting for 70 is a big hole to dig out of.
Dawn
August 22, 2008, 12:37

My mother collects SS for herself and from my father who passed away a few years ago. Still, it isn’t something I think about often. I am the same age as you and really found this information incredibly helpful – thanks!
Pinyo
August 22, 2008, 17:46

@Dawn — Thank you. I appreciate the positive feedback.
Charles Richey
August 24, 2008, 17:38

I doubt we’ll collect Social Security, at least in the way that our parents did. The government’s cheif economist has been talking about the problem for years. Perhaps after the election the other politicians will actually listen.
Pinyo
August 26, 2008, 0:02

@Charles — Yeah, I don’t really expect to collect Social Security. Our government is so fiscally irresponsible right now that I am praying for change.
Merdeka
September 3, 2008, 15:25

My family-of-three payment from Social Security is over $40,000. I am quite pleased with it. Note that this is not charity: I paid in at the maximum level for more than 35 years.
Pinyo
September 3, 2008, 16:42

Merdeka — Unfortunately, it will be charity for me since I’ll be paying into the Social Security system but not able to collect.