What is Social Security and Why is it Important?

The United States Social Security Administration is an independent agency of the U.S. federal government that administers Social Security, a social insurance program consisting of retirement, disability and survivor benefits.

We strongly recommend visiting the government website to learn all about benefits and retirement planning. Here, you can also create an account using your social security number and review your past earnings and social security contributions. The portal is designed to show you your estimated income at retirement based upon contributions as a worker over your career.

https://www.ssa.gov/prepare

Key Points: – The Social Security website explains the broad rules surrounding benefits and retirement. Every individual has different needs. Some people may want to stop working sooner than others and some may want to keep on working as long as they can. The website explains several implications and challenges facing future retirees, including federal taxation rules before and after retirement age as well as paying for healthcare, which can reduce your benefit.

You can apply for retirement benefits anytime between ages of 62 and 70. Generally speaking, the longer you wait to take benefits, the more you will receive. Benefit amounts are also affected by how much you contribute during your working life.

Healthcare – Social Security also deals with provision of healthcare through Medicare. Eligibility for Medicare occurs at age 65. However, Medicare consists of two parts. Part A covers Hospital Insurance, while Part B covers Medical Insurance. If you enroll for Part B of Medicare, something to be aware of is that the payment is taken out of your Social Security benefit payment. 

The Full Retirement Age, for those born after 1960, is 67, and is what Social Security uses to determine your benefit and your family’s benefit. Note that payments grow in the event that you defer retirement through the age of 70. You will need to apply to receive benefits to get the ball rolling, and in order to ensure that you receive your first check in a timely manner, you will need to give yourself time and make the correct selections on the forms available within your account on the Social Security portal.

If you decide to start receiving benefits, but continue to work, your benefits are reduced by $1 for every $2 earned (2024 threshold) above an income threshold of $22,320. However, if you continue to work in the year in which you reach Full Retirement Age, the benefit reduction is $1 for every $3 you earn over $59,520. 

Fewer states tax social security benefits although nine still do. You will, however, pay federal tax on social security benefits.