Retirement planning is something that a lot of people today put off until the last possible moment, but the sooner you begin planning your retirement the better. For many people, Social Security is a major source of income after retirement, but the Social Security system isn’t something that everyone understands. This quick guide will give you the basics of how Social Security works, and how you earn the right to collect Social Security Benefits.
About Social Security
In 1935 the Social Security Act was established, providing that Americans would have some form of financial support in their later years when they were no longer working. Before there was Social Security, support of the elderly often fell to families, local communities and governments. The Federal Government funds Social Security and Medicaid by withholding money from your pay while you are still working. Later when you retire, you have a right to access payments through Social Security, as well as medical coverage through Medicaid.
How you earn Social Security benefits by working.
As someone works, throughout their life they are also earning Social Security benefits in the form of credits. To collect Social Security you will need 40 credits if you were born after 1929. The more money you make the faster you will earn your credits for retirement.
How to keep track of your Social Security credits.
Keeping track of your Social Security credits isn’t difficult. The Social Security Administration helps you to do this. You will find out how many credits you have when the Social Security Administration mails you an annual summary that lists the credits you have earned. You can expect this statement in the mail approximately three months before your birthday each year.
Along with the credits you’ve earned, the statement will contain your earning history, as well as the amount of benefits that you can expect to collect after retirement. Your benefits are determined by how much money you earn throughout your life, so it is important that your earnings be accurate on the statement. If for some reason there is a discrepancy, contact the Social Security Administration as soon as possible to find out what you can do to correct the problem.
Knowing how the Social Security system works can help you now, and will be especially helpful after you retire and begin collecting your benefits.
Roger Levine, Estate Planning Attorney
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