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1. Social Security Provides Retirement Protection

   Nearly 68 million Americans will receive over $1.5 trillion in Social Security benefits in 2024. Nine out of 10 people older than 65 receive Social Security benefits, and three out of four seniors depend on Social Security for at least half of their income after retirement. While those benefits do provide a percentage of your pre-retirement income based on your lifetime earnings, the payments may be far less than your monthly expenses. In December 2023, the monthly Social Security benefit for retired workers averaged $1,905 (or $22,860 annually).

2. Social Security Provides a Guaranteed Progressive Benefit

   Social Security is a progressive benefit. That means that workers in the lower-earning levels receive a higher proportion of their previous earnings than do higher-earning workers. But while higher earners can typically expect that Social Security will replace a smaller percentage of their prior earnings, that benefit will be larger, in dollar terms, than for a lower-wage earner.

3. You’re Contributing to Social Security Through Taxes

   If you’re working, you’re likely making payroll tax contributions to Social Security. For 2024, the tax rate is 12.4%, or 6.2% for both the employer and employee, on the first $168,600 of wage income; you and your employer each pay half of the tax. Once you receive Social Security benefits, much of this income will likely also be taxable.

4. Social Security Benefits – Paid After They’re Due

   You’ll receive your Social Security benefits the month after they’re due – so, you’ll see a deposit for your November benefits in December. When you’re deciding when to start your benefits, plan accordingly.

5. Social Security Benefits Are Modest – But Important
   Qualified Retirement Plans, like IRAs, can help bridge the gap between your Social Security benefits and your pre-retirement income. These plans can be a useful tool in your long-term savings strategy to ensure your finances can support you throughout your retirement, but your age will be a determining factor for when you can take penalty-free actions, like distributions. 

• If you are 50 or older, you can make catch-up contributions slightly beyond the standard limit to accelerate your savings as you near retirement.

• The rule of 55 allows workers who leave their job for any reason to begin taking distributions from their current employer’s retirement plan, such as a 401(k), without the typical 10% tax penalty, during the year they turn 55 or after.

• At 59 ½, any distributions you take will not be subject to the 10% early withdrawal penalty on early distributions. 

Things to Know Before You Retire

Retirement income planning starts before you say good-bye to the working routine. Part of that planning is maximizing your Social Security benefit. Here are five things to consider as you evaluate when to claim your Social Security benefits:

• Know your full retirement age: If you were born after 1960, you must wait to age 67 to collect your full benefit.
• Understand about starting benefits early: You can begin collecting at age 62, but with a permanent penalty that will reduce the amount you can collect by 30%.
• Consider the impact of working and taking Social security:  If you are at full retirement age, you can work and collect Social Security benefits at the same time. However, when you file for Social Security benefits before you’ve reached full retirement age, you’ll be given a Social Security earnings test. This test could result in the Social Security Administration withholding some – or all – of your monthly Social Security benefits if you are still earning wages.
• Think about delaying benefits until full retirement or later: Waiting to claim your benefits until you reach full retirement age means you will earn your full benefit. If you delay receiving your benefit past your full retirement age, you will earn even more. 

• Full retirement age for people born between 1943 and 1954 is age 66. 

• For those born from 1955 to 1959, it is age 66 plus up to 10 months. 

• For those born in 1960 or later, full retirement age is 67.

• Waiting to claim your benefits until you reach full retirement age means you will earn your full benefit. If you delay receiving your benefit past your full retirement age, you will earn even more. Full retirement age for people born between 1943 and 1954 is age 66. For those from 1955 to 1959, it is age 66 plus up to 10 months. For those born in 1960 or later, full retirement age is 67. 
• Learn about  spousal benefit eligibility: Lower-earning spouses receive the benefits based on their spouse’s earning record. Spouses can earn an amount equal to up to 50% of the higher-earning spouse’s benefit at their full retirement age. People married for at least 10 years may be eligible to receive benefits based on their ex-spouse’s employment earnings. The total amount able to be received will depend on various factors, like both of your ages, incomes, and more.

Start Planning for Your Retirement Now

Many Americans don’t have enough in savings to sustain the standard of living they’re accustomed to as they transition to retirement. Retirement income planning that doesn’t just rely on Social Security is critical. To maintain your standard of living after retirement, you’ll need to calculate your best retirement income, and create a plan to appropriately save for retirement and your financial goals. You can sign up online to calculate your Social Security benefits now.

Smart saving, budgeting, and planning are key to living comfortably after you retire. Consider investing in an American Heritage IRA, Certificate or Bump-Up Certificate to enjoy competitive rates and some great tax benefits with these accounts, like tax-deductible contributions or tax-free earnings. Get all the insight you need by partnering with local retirement professionals at American Heritage’s Investment & Retirement Center (IRC). Set up your free consultation to learn more and get started.