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How To Get By On Social Security
If you’re currently approaching your retirement years and aren’t sure whether you’re financially ready, then you are among many who feel the same way. With the Baby Boomer generation just beginning to reach retirement age, almost twenty percent of the U.S. population will be in their mid-sixties. For many retired seniors, Social Security benefits will be a significant part of their retirement income. Concerned about how you will get by on Social Security in your retirement years? You’re not alone.
Social Security For Retired Persons
Social Security in the United States is a federal insurance program that provides benefits for those who are disabled, unemployed, or retired. Currently, approximately one in four households receives Social Security income.
Social Security full-benefit retirement age has gradually increased over the past three decades. As of 2012, the age a person must be to receive full retirement benefits is 66 for those born between 1943 and 1954. Those born after 1960 can expect to have to wait until age 67 before full benefits are available. Early retirement benefits are available starting at age 62. Currently an average of three out of four workers claim retirement benefits before reaching full retirement age.
Getting By On Social Security
Ideally, people retiring will be able to live on a combination of income sources including Social Security, pensions, and personal savings accounts. However, millions of Americans count on Social Security as a primary retirement income. If you’re counting on Social Security to be your largest source of retirement income, then there are some measures you can take to help your plan to be more successful.
Boost Your Benefits
There are some steps you can take now to maximize the benefits you will receive through Social Security. The highest 35 years of earnings factor into your payout, so working another full time or even a part-time job for a while can boost your end benefits. Delaying retirement a few years can also boost your benefits since you’re likely to earn more in those years than in the first years of your career.
Another way to maximize your benefits is to wait until full retirement age to sign up to receive them. Social Security payments will increase for every year between 62 and 70 that you delay claiming them. Of course, you’ll have to judge carefully when you should claim according to your own circumstances. Holding off for too long might be either impossible or impractical.
Don’t Retire Fully
The idea of continuing to work after retirement may or may not seem appealing. If you struggle, however, to make it on Social Security benefits alone, then it may be a viable option. Even making a small income working part time can fill in the gap between the income you need to be comfortable and the income paid through Social Security.
People are allowed to claim Social Security benefits and work at the same time. However, be careful that you aren’t claiming too early or earning too much at your post-retirement job, or you won’t receive the full benefits right away. As of 2011, if you’re under your full retirement age you can earn $14,160 annually without a penalty. If you’re 62 years old or under you need to make under $12,000 annually. Once you reach full retirement age you can make up to $37,680 before seeing a decrease in your Social Security benefits.
Reduce Your Household Budget
Retirement for most Americans will mean living on a tighter budget. This is especially true if only one source of retirement income is available. A reduction of the household budget is most likely going to be necessary if you’re planning on getting by on Social Security alone. It’s best not to wait until you retire to test out a practical retirement budget. Instead, practice living on the smaller budget for a few years prior to leaving your job.
Learning to live within your means is critical to retiring solely on Social Security. Start out by eliminating as many expenses as you can. If you can pay off your mortgage, credit debt and any car loans before retiring, this will help. If not, you’ll have to factor those into the budget and be even more conservative with discretionary spending. Many retirees also choose to sell their homes and downsize in order to reduce their monthly expenses. It’s important to remember while reducing your budget not to cut essentials like your family life insurance policy or any debt payments. These kinds of reductions could put you into a worse financial situation.
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