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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.

Recordkeeping and administrative services for the plan are provided by J.P. Morgan Retirement Plan Services.

This material is provided for informational and educational purposes only. It is not intended to provide personalized tax, lending, ERISA, legal or investment advice. A professional should be sought for all such matters. Nothing in the Education Section of the web site should be construed as a solicitation of an offer to buy or sell any security. While sources of information are believed to be reliable, JPMorgan Retirement Plan Services does not warrant or guarantee the information. Where assumptions have been made, they are hypothetical in nature and not representative any particular security. Past performance is not a guarantee of future results and investing in securities involves risk, including the possible loss of principal.