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Social Security basics

Only a generation ago, Social Security was most people's retirement plan. Today, savvy investors know they must look to multiple sources to effectively save for their own retirement. Social Security still has a role in your retirement, though. Here are some important things you may want to know as you near retirement.

Full Retirement Age (FRA)

Full Retirement Age (FRA) is the age at which you may begin to receive your full Social Security benefits. FRA had been 65 for many years. Those rules have changed.

Beginning with people born in 1938 or later, FRA gradually increases. It peaks at age 67 for people born in 1960 or later.

Receiving Social Security benefits

Regardless of your FRA, you may choose to begin receiving Social Security benefits at age 62. Your monthly payments, however, will be at a reduced rate.

Early retirement gives you about the same total Social Security benefits as full retirement over your lifetime. Those benefits will be paid in smaller amounts, however, over a longer period of time.

You also may delay receiving Social Security benefits until after you reach FRA. In this case, your monthly benefit will increase but you will not receive as many payments because you chose to forego payments beginning at your FRA.

Family benefits

When you start receiving Social Security retirement benefits, some members of your family may also qualify for benefits.

  • Your spouse. Your spouse at his or her FRA may receive a benefit equal to one-half of your full retirement amount, even if he or she never worked. At age 62, your spouse may receive 35% of your benefit. Note: Your spouse may not receive Social Security under your work record and his or her own work record. He or she will receive whichever benefit is the highest.
  • Your spouse who is caring for your eligible child. If your child is younger than 16 years old, your spouse may qualify for an amount equal to half of your benefit regardless of his or her age. Your spouse would receive this benefit until the child reaches age 16. At that time, the child's benefit continues, but your spouse's benefit stops unless he or she is age 62 or older.
  • Your biological child, adopted child, stepchild or dependent grandchild. Children may also qualify for benefits if they are:
    • unmarried
    • under age 18
    • up to age 19, if in high school
    • any age, if disabled before age 22

Working and collecting social security

You may lose benefits if you work and collect Social Security before you reach your full retirement age:

From age 62 until one year before you reach FRA, $1 of your benefits will be withheld for every $2 in wages above $12,960/year ($1,080 per month). In the year prior to reaching FRA, you'll forfeit $1 for every $3 in wages earned over $34,440. There is no penalty for workers who have reached full retirement age. The threshold limits above are for 2007 and are adjusted for inflation annually.

Pension payments, annuities, and the interest, dividends or capital gains from your savings and investments are not considered earnings for Social Security purposes.

Although Social Security may not support you the way it may have for your parents, it still will be a nice supplement to the retirement money you worked so hard to save.

Core securities, when offered, are offered through GWFS Equities, Inc. and/or other broker dealers.

GWFS Equities, Inc., Member FINRA/SIPC, is a wholly owned subsidiary of Great-West Life & Annuity Insurance Company. Recordkeeping and administrative services are provided by Empower Retirement™.

This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for investment, accounting, legal or tax advice.