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Social security and retirement benefits

Social Security

Long before you give up your job and retire, you'll have to answer this question: "Will I have enough income during retirement to cover my living expenses?"

As you plan for your financial future, it will help to know that, when you retire, Social Security will provide you with a monthly income for life.

Social Security alone, however, may not be enough for a comfortable retirement. That may depend on whether you're entitled to a pension from work and whether you've been able to save some money on your own.

If—like millions of American workers—you have neither a pension nor savings, Social Security could become your key financial lifeline. (Union members are more likely to have pensions.)

Social Security already provides crucial financial support for millions of Americans.

In 2008, some 34 million retired American workers will receive an average of $1,079 a month. Married couples will receive $1,761 a month, while widows and widowers will receive an average of $1,008.

Significantly, two-thirds of all beneficiaries will get more than 50% of their income from Social Security.

Because of the role Social Security will play in your retirement, it's important for you to learn how the program works, how your benefits will be calculated and what decisions you will have to make when you decide to retire. Understanding Social Security will help you avoid costly mistakes.

10 things you need to know about social security

  1. Why is Social Security important?
  2. How does Social Security work?
  3. What's happening to Social Security's finances?
  4. How much money will I get?
  5. What are my retirement choices?
  6. Which choice is the best financial deal?
  7. How will working affect my benefits?
  8. How does a spouse get benefits?
  9. When and how do I apply for Social Security?
  10. What's the rest of the Social Security story?

What are my retirement choices?

You can take your Social Security payments at 62, at 65 plus or at 70. These are your options:

Early retirement. If you take your Social Security at 62, your monthly payments will be permanently reduced between 20% and 30%, depending on your date of birth. By retiring at 62, you will get payments for a longer period of time but with fewer dollars than if you had waited until "normal" retirement age of 65 plus. The age 62 reductions for you and your spouse are shown here.

TIP: When a spouse dies, his or her widow may be entitled to a survivor benefit. Often that means a widow will receive her late husband's payment if it is larger than hers. If her husband took a reduced benefit at 62, she will get the reduced payment for the rest of her life.

Example: A husband is entitled to a $1,200 benefit at full retirement age but decides to take his benefits at 62 and thus receives $960 a month. On his death, his widow will get $960 a month instead of the $1,200 she would have gotten if her husband had waited until full retirement age to take his benefits.

Normal retirement. The "normal" or "full retirement age" is slowly moving up from 65 to 67. For instance, a worker who was born in 1942 and will turn 65 in 2007 will not reach full retirement age until she is 65 and 10 months old. You can see a chart showing your full retirement age here.

Late retirement. Social Security offers a bonus to those who wait until 70 to take their benefits. If the worker who was born in 1942 waits until 70 to take her benefits, she will earn a 7.5% bonus for each year she waited. By waiting, she will receive fewer payments but with more dollars in each than if she had retired earlier. A chart showing the bonus payments is found here.

TIP: One other reason to wait: During those extra years of work, you may continue to earn a salary and contribute to Social Security, which may improve both your eventual Social Security benefit and your pension, if you have one.

When and how do I apply for Social Security?

Contact Social Security three months before the month in which you want to file for retirement benefits. There are three ways to apply for retirement benefits:

Social Security says you will need certain documents and information when you apply:

  • Social Security number;
  • Birth certificate;
  • W-2 forms or self-employment tax return for last year; and
  • Your bank name and account number so your benefits can be deposited directly into your account.

You also will need your discharge papers if you served in the military, your spouse's birth certificate and Social Security number and your marriage license if he or she is applying for benefits, and proof of U.S. citizenship or lawful immigration status if you were not born in the U.S.

To do:

Use your annual Social Security retirement estimate to prepare a hypothetical retirement budget for ages 62, 65 plus and 70. It will help you understand what awaits you in retirement. The calculators on the Social Security Web site can help you decide.


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Take Action:

Visit the AFL-CIO's Social Security Web site for more on this topic and to learn about action the labor movement is taking to help preserve Social Security and stop risking America's financial security. Your voice is important!

Related Links:

The following are useful Social Security web pages: