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Social Security: What You Need To Know

Enacted on August 14, 1935, the Social Security Act attempted to limit what were seen as the perils of modern American life: old age, poverty, unemployment, and the burdens of widows and fatherless children. The Act was passed by Congress as part of the New Deal and signed by President Roosevelt during his first term.

As with all things political, the Social Security Act was not without controversy. Critics released negative campaigns during its inception; most notorious being the 1936 claim that every U.S. citizen would be forced to wear dog tags.

Who is eligible for Social Security?
To be eligible for Social Security benefits, you need 40 work credits, which usually amounts to about 10 years in the workforce. Your credits determine your eligibility, not the amount of your payments. Your payment amounts are based on the 35 years of your work history in which you earned the most.

The 40-credit requirement only relates to individual benefits; you may still be eligible for spousal or survivor benefits regardless of credits earned.

How much of my current income will Social Security replace?
Under the current system, Social Security will replace about 75% of pre-retirement income for low-wage workers, 40% for medium-income workers and 27% for those with high incomes.

The current maximum monthly Social Security benefit for a worker at Full Retirement Age (FRA) is $2,861. However, most retirees do not receive the maximum benefit. The current average monthly benefit for a retired worker is $1,461. The average benefit increases to $2,448 for a retired married couple.

Accessing your benefits statement
If you are 60 or older and do not collect benefits or have an online Social Security account, you will receive a printed statement of benefits in the mail every year.

If you are under 60, or are already collecting benefits, you can view your statement by creating a free account at the Social Security Administration’s website. You will need to provide some personal information to verify your identity, and create a username and password.

Determining your Full Retirement Age
Your FRA, or “normal retirement age,” is the age when you are entitled to receive full or unreduced Social Security benefits. Your FRA is based on your birth year.

Year of Birth Your Full Retirement Age
1937 or earlier 65
1938 65 and 2 months
1939 65 and 4 months
1940 65 and 6 months
1941 65 and 8 months
1942 65 and 10 months
1943 – 1954 66
1955 66 and 2 months
1956 66 and 4 months
1957 66 and 6 months
1958 66 and 8 months
1959 66 and 10 months
1960 and later 67

Spousal benefits
You must be age 62 or older to qualify for spousal benefits, and you cannot collect benefits on your current spouse’s record until he or she files for their own benefit.

If you file for spousal benefits at your full retirement age, your spousal benefit will be equal to 50 percent of your spouse’s benefits payment. This amount is reduced if taken before your FRA, but won’t increase if delayed.

The above rules also apply for divorced-spouse benefits, as long as the marriage lasted at least ten years and the beneficiary spouse is currently unmarried.

Survivor benefits
A surviving spouse can receive up to 100 percent of the deceased spouse’s benefits. Except in the case of an accident, a couple must have been married at least nine months at the time of death.

The surviving spouse gets full benefits at his or her FRA, and must be at least 60 (50 if disabled) for a reduced benefit. The benefit is not available if the surviving spouse remarries before age 60.

In the case of divorce, the divorced spouse can claim survivor benefits on his or her ex-spouse’s record if the marriage lasted at least 10 years.

What if I retire before I reach my full retirement age?
You can retire any time between age 62 and your full retirement age. However, if you start benefits early, your benefits are reduced a fraction of a percent for each month before your full retirement age. Reduced benefits begin as early as the first full month after you reach age 62.

For example, assuming your FRA is 67, depending on when you retire these are the percentage of Social Security benefits you will receive:

  • 70% at age 62
  • 75% at age 63
  • 80% at age 64
  • 86.7% at age 65
  • 93.3% at age 66
  • 100% at age 67

Benefits to delaying retirement
If you retire at your FRA, you will receive full benefits. You will enjoy increased benefits, if you delay retirement beyond your FRA, up to age 70.

If you delay your retirement benefits, you may also be eligible for delayed retirement credits that would increase your monthly benefit. For example, delaying benefits from 62 until age 70 would amount to a 76% increase in monthly payments.

Of course, when to start collecting Social Security benefits depends on various factors including your health, marital status, years in the workforce and other retirement assets you have.

And if you do decide to delay your retirement, be sure to still sign up for Medicare health insurance at age 65.

Challenges facing Social Security
Many Americans who have not yet reached retirement age are concerned whether or not Social Security will be around when they retire, and what form it will take. And it’s a reasonable concern, as the program faces several modern-day challenges:

  • Retiring Baby Boomers will strain reserves. Baby boomers, born between 1946 and 1964, are around 75 million strong and make up about 40% of the nation’s population. The younger baby boomer set—now in their mid- to late-50’s—will be reaching retirement age within 10-15 years.
  • Life expectancy continues to increase. Advances in medicine, nutrition and sanitation, along with other factors, have increased the average life expectancy in the U.S. from 52 in 1960 to 78 in 2019. People are living longer, and collecting benefits longer. In fact, the SSA Life Expectancy Calculator estimates that one out of four 65 year olds today will live past 90, and one out of ten will live past 95.
  • The ratio of workers to beneficiaries is shrinking. In 1960, the ratio of workers to beneficiaries was 5.1 to 1. By 2016, the ratio had dropped to 2.8 to 1. Projected estimates for 2035 show the worker to beneficiary ratio will decrease further to 2.2 to 1.

Simply put, Americans are living longer and having fewer children.

To meet these challenges, some potential changes to the Social Security system include:

The bottom line
As of today, Social Security reserves are projected to pay full benefits until 2034. Trust income is projected to cover 77 % of benefits from 2034 to 2092, assuming no major changes. Basically, a 55-year-old today won’t likely have to worry about his or her benefits being affected until age 71 at the earliest, assuming no other changes to Social Security benefits.

Beyond that, Social Security faces an uncertain future and should be considered just one part of a robust retirement plan. The old adage “don’t put all of your eggs in one basket” certainly applies; and financial experts agree it’s important to supplement your retirement through other means (i.e., investments, IRAs, 401(k) plans, etc.).

Take the time to meet with a trusted financial advisor who can suggest how best to help plan for retirement now in case Social Security is not around later.

Trust. Confidence. Guidance.
What are your short- and long-term financial goals? From your first job to retirement—whatever your age or stage—the experienced Wealth Advisors at Tower Wealth Management® can help you work towards a successful financial future.

Tower Wealth Management is the financial services group located at Tower Federal Credit Union, and their services are available exclusively for Tower members.

Schedule a no-cost, no-obligation appointment with a Wealth Advisor.

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References: Social Security Administration, AARP,, Money Talks News

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