In one's twilight years, the last thing anyone would want to worry about is their financial security. This is why those approaching their retirement age should plan accordingly, which involves understanding the dynamics of their monthly payment from various income sources.
It doesn't have to be weekly fishing trips or unlimited yearly vacations. Just enough for a comfortable life with maybe a few luxuries. A thorough evaluation of living costs, extra costs, and money income can shape a more comfortable retirement. The bottom line is when you reach your senior years, you retire and start relaxing no more working and worrying about finance. But maintaining a family income that sustains your desired lifestyle is crucial.
But where can one start? Fortunately, the Social Security Administration has got your back, but understanding the distribution of income within your household incomes can ensure that you're maximizing all available financial resources. According to the Social Security Administration, 97% of the elderly aged 60 to 89 either receive Social Security or will receive it. Hence, Social Security becomes a reliable source of income for homeowners and renters alike, ensuring a stable personal income during retirement. This means that Social Security is bound to be a huge help for seniors in retirement, offsetting effects of taxes and other financial hurdles that come during this period.
However, the maximum benefit from Social Security benefits can be a bit confusing. Extensive studies show that being aware of the various sources of income in employer-provided retirement plans, personal savings, and government programs are vital. Adult living can be significantly influenced by how well you understand and manage your salary income and benefits during your working years.
For some background, the Social Security system in the United States was established by President Franklin D. Roosevelt on Aug. 14, 1935. This happened when he signed the Social Security Act into law. The very first beneficiary was Ida M. Fuller, a retired legal secretary in Vermont.
Before we dive into the deeper aspects of Social Security, let us first discuss what it is. Social Security is not just for American seniors. It is also for people with disabilities, deceased workers, and family members of retired and disabled workers throughout the country. This means if you are a widow or a widower, you can start claiming your benefits.
In addition, Social Security Disability insurance is designed to provide subsidy to people who are physically restricted in their ability to be employed because of a notable disability. Disability benefits are important for those under the retirement age and need financial assistance.
Social Security also has a health insurance program called Medicare. Medicare is the United States health insurance program for people age 65 or older. Though in special cases, people of younger age can also qualify for Medicare if they have disabilities or are suffering from permanent kidney failure.
Social Security is a pay-as-you-go program. Unlike supplemental security income which is financed from revenue, individuals who pay Social Security taxes finance the monthly benefits. It is different from company pensions that are prefunded. Unlike Social Security that is a pay-as-you-go program, prefunded retirement programs use accumulated money in advance to take care of their people when they retire.
Social Security differs from company pensions and life insurance that are “prefunded.” In prefunded retirement programs, the money is accumulated in advance, so it will be available for the working individuals when they retire. It is more like saving your earnings safely, so you can enjoy it when you retire.
According to the National Academy of National insurance, about 169 million Americans throughout the country pay Social Security taxes, and 61 million collect monthly benefits. This means that about one in four families receives benefits from Social Security. You can really say that once you reach your retirement age, the Social Security program will have an impact in your earnings.
As seniors, having an additional source of money is important. Most active American workers today are usually eligible for company pensions, but it's also important to take advantage of the government-mandated Social Security system. A majority of the recipients of Social Security benefits in America are senior citizens. After all, the program serves millions of the elderly and help them stay out of poverty by covering their basic expenses.
According to the Center of Budget and Policy Priorities, 40% of American senior citizens aged 65 without Social Security benefits, have earnings below the poverty line. However, with Social Security benefits they would have better chances, with the program supporting over 14.7 million American seniors out of poverty.
Today, over 65% of elderly beneficiaries rely on Social Security to provide for them, with Social Security comprising the majority of their earnings. Around 57% of American seniors said that Social Security benefits provide for majority of their income. This means that those in the retirement age rely on this program for the betterment of their lives.
On the other hand, 24% of retirees said that it is their only source of retirement income. This only shows that dependence on the program increases as Americans age. By providing supplemental cash aid for necessities and funds to purchase maintenance prescription drugs, you can say that Social Security can benefit senior citizens by ensuring that they spend their elderly years in comfort.
Though there are private assistance groups like Meals on Wheels that provide freshly cooked nutritious meals for the seniors, it is, of course, better to have a retirement fund of your own.
An American Senior Citizen will become eligible for Social Security retirement benefits when they reach the age of 62. You can also check your statement online for your additional information. Simply make an account here and you can start viewing your updated contributions.
Eligibility requirements are easy, just pay your Social Security taxes. You can have it automatically deducted from your payroll, or if you are self-employed, by filing your taxes. You will qualify for Social Security by accumulating credits when you pay your tax.
American workers can earn up to four credits per year. You will then qualify for your retirement benefits when you reach a total of 40 lifetime credits. So that is around 10 years of working and paying your Social Security taxes. Earn four credits per year by at least earning $5,640 for the year.
Social Security helps the elderly a lot with their financial needs. That is why if you have loved ones approaching their golden years, you need to make sure that Social security has got them covered. Couples who are retired need to make sure that they already accrued enough credits for them to be eligible for the program.
Senior citizens can rely on Social Security to support their retirement lifestyle. This is super important for elderly Americans with limited resources. It can help the seniors by ensuring they receive regular income every month. Social Security benefits are basically cash payments that a beneficiary can expect every month.
The government has no restrictions on how you spend your payment. It can be for nursing home care, living wages, buying prescription drugs, and other health care costs.
This additional income is important for senior citizens everywhere. After all, as of 2019, the average Social Security check for a single retiree is $1,470 per month. And if a senior citizen begins collecting their benefits at the age of 62, the maximum benefit amount that they can expect is $2,209 per month.
Social Security functions will benefit the elderly Americans. Applying is easy, simply visit the Social Security website and apply online. It will only take you about 15 minutes, but you will reap the benefits for years to come.
Social Security and Medicare are two separate government programs. However, you can qualify for both programs if you pay for it during your active working years.
Social Security mainly provides financial support to support living expenses, while Medicare is a health insurance program that takes care of doctor visits, hospital admissions, and other medical expenses.
Though both Social Security and Medicare are government programs, they are managed by two different organizations. According to an IRS agent and certified financial planner Andy Panko, “Social Security is run by the Social Security Administration, whereas Medicare is run by the Centers for Medicare and Medicaid Services.”
This means that the one who determines eligible beneficiaries of Social Security benefits and Medicare is the Social Security Administration. Basically, though they are different programs the administrative function of Medicare is handled by the Social Security Administration.
Senior citizens who enroll in Medicare at their retirement age can enjoy 100% of their benefits. The cost of Medicare is deducted from your Social Security if you decided to enroll in this program. It is not automatically covered, and you must pay for the coverage to enjoy its benefits. The amount that you need to pay varies depending on different factors such as retirement income and the health plans that you wish to avail.
Health care costs can be devastating to your budget and if you don't have premium insurance, Medicare is the next best thing. It provides health assistance and will supplement your medical needs like Medicare part D that covers prescription drug cost. Overall, health insurance coverage is a must for the seniors. However, if you are a beneficiary of SSI you are automatically eligible to receive Medicare benefits.
The answer to this question is, it depends. Senior citizens who have several resources like company pensions, retirement account withdrawals, or part-time work, should pay their appropriate taxes. However, if Social Security is your only source of income then you most probably won't have to pay any taxes.
If you have a total income between $25,000 and $34,000 then expect to be taxed at least 50% of your Social Security benefit. For those who have a total income that is more than $34,000, your taxable Social Security income is 85%. If you are married and have a combined income of $32,000 to $44,000, you can expect to pay taxes up to 50%. But for couples who exceed the $44,000, you are taxable up to 85%.
However, there are states that don’t tax Social Security income. So if you are a resident of these areas you won't have to worry about taxes. Here is the list of states that do not tax Social Security income:
Here are additional resources and websites that will give you more information to better understand your Social Security retirement benefits.
This site has a questionnaire that will help you find additional information on the benefits that you are eligible to receive.
This site is an E-Government initiative that is the official benefits website of the U.S. government.
A publication that gives a comprehensive explanation on how to earn your Social Security credits:
Benefits for seniors go beyond just Social Security. For instance, those residing in assisted living facilities may find that their disposable income is considerably impacted. This can come from a range of financial obligations, from medical costs to fees associated with care facilities.
When looking into Social Security benefits, considering factors such as the age at which you retire can significantly impact your monthly payment. Similarly, if you have an unmarried child who is dependent, understanding how this might impact your benefits is essential. Payroll taxes contribute significantly to the financing of such benefits, and understanding the relationship between your career-long contributions and your eventual benefits is also crucial.
Given the diversity of American workers' median income, it is pivotal to understand how Social Security can enhance financial security by providing a stable monthly payment to complement other income for homeowners and retirees.
iculous understanding of how the benefits for seniors can be optimized to support this phase of life.
Additional resources can provide depth and insight into these critical aspects of planning for retirement and managing personal income and expenses during this period. Make sure that the information and advice you follow come from a reliable source to ensure accurate and applicable financial planning.
Retiring in your senior years should not be stressful. That is why knowing that the government has programs for seniors is a huge help for retirees. Do you want to know more about senior care and other tips? Contact Senior Strong today!