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) 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.
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.
When you start receiving Social Security retirement benefits, some members of your family may also qualify for benefits.
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.Recordkeeping and administrative services for the plan are provided by J.P. Morgan Retirement Plan Services.