Be Ready for Retirement

By December 16, 2014Benefits

Old men on a bench enjoying retirementYou’ve been a diligent worker your entire life. You’re a contributing member of society: you’ve paid your taxes. As you’re getting older, you might be wondering about retirement. How old do I have to be to retire? Do I have to apply somewhere? What kind of benefits do I receive from the Social Security Administration (SSA)?

If you have these questions, you are not alone. Read below for some answers.

What is the Retirement Age?

The normal retirement age has traditionally been age 65 but has been raised to 67. There is no “set” retirement age. However, if you would like to receive benefits, you have to be between the ages of 62 and 70.

Keep in mind that if you retire early, the monthly benefit amount will be reduced because you will receive them over a longer time frame. If you take them later in life, they will be a larger amount, but you receive them over a shorter time frame.

If you retire later in life, you will be eligible for increased retirement benefits. If you’re interested, look up the exact increase.

How Do I Know If I’m Eligible?

In order to qualify for Social Security retirement, you need to have sufficient credits. Credits are dependent on the amount of time you have worked. The SSA explains when you are entitled to retirement credits.

How Much Will I Receive in Benefits?

How much you receive depends on your work history and your earnings. It also depends on when you decide to retire.

It’s important to note that if you have earned beyond the average amount, some of your benefits may be withheld; when you do reach full retirement age, however, your benefit amount will be calculated and distributed to give you credit for the months that you did not have benefits because of your earnings.

You can get an estimate of the benefits you’ll receive, or being the retirement application on the SSA website.

Be Prepared for Retirement

Your Social Security retirement check will not be enough to sustain you through your retirement, which on average last 20 years. Make sure you have the money to keep yourself comfortable.

Look to Save with Your Employer

An option to consider for retirement is your employer’s 401(k) plan. Your employer’s 401(k) plan is set up so you can save some of your earnings for retirement while you are working. The beauty of a 401(k) is that it’s exempt from federal and state income taxes until you take the money out. You can set up your 401(k) so that a percentage of your paycheck automatically goes into the 401(k) every pay period. Some employers also match your contribution as an incentive for you to use your 401(k). Take advantage of these opportunities.

Along the same lines, it is important to be aware if your employer offers pension plans. A pension plan is a retirement plan where your employer makes tax exempt contributions to your account. When you retire, you receive the benefits.

Start Saving Now

It is important that you start a savings account or investment and contribute to them regularly. Set up a schedule about how much should be deposited each paycheck. Calculate how much you will need to retire comfortably and set a goal. In order to calculate a realistic goal, reflect on your living standards. Don’t forget to consider inflation and the cost-of-living.

When you start your savings, don’t touch them unless absolutely necessary.

Sources: United States Department of Labor, Social Security Administration, Investopedia, Practical Money Skills 

Photo Credit: Pedro Ribeiro Simões via Creative Commons