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The Social Security Income is the benefit provided by the Federal government. The Social Security program is funded by levying a tax on both the employers and the employees.
This program was created by the Social Security Act of 1935 to provide benefits to old people, and survivors and their families. The money is paid to the person and his family on the basis of his employment records and his contributions to the whole government system.
Retirement age for receiving Social Security
The retirement age was previously 65 and the earliest when a person could start receiving Social Security retirement benefits was 62. But, recently the retirement age has been increased to 66 and is supposed to increase by two months each year starting from 2017.
This will continue till the retirement age reaches 67 in 2022. However, till now the age to receive Social Security benefits for those who retire early is 62.
The leaders of the deficit commission, Democrat Erskine Bowles and Republican Alan Simpson, proposed a continual increase in the full retirement age a few days ago. They proposed that the retirement age may be increased to 69 within about 2075. Similarly the early retirement age would also go to about 64 the same year.
According to financial experts and budget experts, the retirement age should be increased farther as average Americans are seen to be living longer and thus the retirement years are increasing too. Most are of the opinion that the retirement age should be increased to around 68-70.
However, according to the opposing group the increase in the retirement age could harm the workers mostly in physically demanding jobs or those who are already in poor health or have low-income. Also, this can hurt seniors in regards to getting jobs. Those workers in the age group of 55 and above, who were previously laid-off are less likely to get a new job.
The increase in retirement age will also increase the disability claims by older people unable to work due to their health conditions. This idea was put up by the government auditors. As per recent reports, around one fourth of the workers aged 60 to 61 reported their inability to work due to poor health conditions.
This increase in disability claims is also likely to hurt Social Security financing as disability benefits are generally higher than early retirement benefits as per President Obama’s deficit commission.
Around 54 million retirees and disabled workers, surviving spouses and children are now getting Social Security benefits. The payments for the retired workers reach an average of $1,020 a month and the disability benefits average $929 per month.
In 75 years, about 122 million people, or one-fourth of the whole population will be drawing Social Security benefits. But the Social Security is supposed to be left without any money atleast by 2037. Thus, according to government Accountability Office (GAO) reports, the rise in the retirement age will save some money for the Social Security benefits fund. But as said before, this will also hurt the Social Security fund as disability claims can increase.
How can common people cope with this?
1. Save as much as possible – In order to secure your future and the future of your family, you should start saving as much as possible. You can open a savings account and should put money into it each month. Avoid using the money from this account. Also, create a budget based on your total income and expenditure so that you expend in a planned way. Budgeting helps you to save more.
2. Lower usage of your credit cards – So that you incur less amount of debt and so that you save more, it is important for you to lower the usage of credit cards. Credit cards generally have high interest rates and thus, if you miss payments, it will increase the amount of your debt. Even, if you use the cards, you will have to maintain the on-time payments on the cards.
3. Buy some insurance policies – There are various insurance policies like life insurance, health insurance, travel insurance, car insurance, home insurance, etc. available for your needs. First know more about the insurance policies in details. Use car insurance comparison for better deal.
4. Practice frugal living – In order to save more, you should also practice frugal living. Frugal living is one of the most structured ways of handling your money so that you save more. If you practice frugal living, you will be able to avoid falling in debt and saving more at the same time. Frugal living does not mean giving up on each of your luxuries; rather it helps you in saving more than usual. You will also have to stop yourself from falling prey to impulse buys.
5. Plan your retirement – It is also important to plan your retirement much before your retirement age. You are required to set a realistic goal. You will have to determine how you want to live your life after retirement and start saving accordingly. You can consider contributing part of your salary to a 401K. This will provide you with various benefits like deferred tax growth on your savings, tax deductions and matching contribution from your company. You can also use the retirement calculators to plan your retirement.
6. Invest in stocks and bonds and shares – In order to save more for your future, it is also important for you to invest in stocks and bonds. Investing in stocks and bonds are a great way of improving your income in the long run. Stocks generally give you high returns on your money. Working part time too can improve your income.
In order to live well during your retirement years, you can no longer rely on the pension you are going to get or the social security money. It is thus, important for you to plan and save more. Thus, you can follow the above tips to save more money to secure your future.
I am not counting on social security income in my retirement life and, I don’t advice anyone to count that money in, if your retirement is more than 20 years away.
To me, there is no better alternative than saving and investing money while consistently trying to increase your income to have better financial health during retirement. Readers, what is your thought?
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I just feel bad for the people that are on the cusp of retirement if there are any changes made. OR those older folks that havent saved as much most their life and now approaching it if there were ever to be any changes. I never thought of the aspect of older americans in the workplace in hazardous jobs may actually be a liability with injuries. Increasing retirement age may infact increase workers comp costs as they just cant perform the job functions like they used to.
For people in thier 20’s, I think the best si to foret that you will have social security in your retirement, if its there ita plus. Do not plan for it or you will be unpleasenly suprised.
I think it’s insane for the government to raise Social Security to 69 years old. There are some careers – like my husband’s in law enforcement – that one cannot physically do to that age. Heck, a lot of law enforcement jobs have mandatory retirement ages FAR younger than 69. I think there’s got to be a way for some professions to get their social security checks before reaching 65, 67, 69 or whatever that golden number ultimately ends up being.
My father passed at 55 so it wouldn’t have helped him any. My step father though at 73 just retired. He is as strong as an ox and hopefully can live to the point that 69 would have looked young.
I’m not sure what the answer is but we have to fix Social Security, and that is going to hurt everyone. We will probably have to raise social security taxes as well as raise the retirement age. One of the problems is that Social Security was only supposed to be a supplement to retirement income. Too many people today are relying on it for a large portion of retirement income.
I too don’t know what the answer is but I do know there is a problem to fix. Too many people have been relying on programs like this instead of making sure they look after themselves. People need to get into the habit of saving and living within their means. It is the only way they will actually guarantee financial security down the road.
Very nice post,
one of the most important things global meltdown has taught us is to save money and plan for retirement.
Thanks for your valuable comments 🙂
Yes. The full retirement age (FRA) has already increased from 65 to 66 and will rise incrementally over the next several years to 67. These changes were mandated by Congress in 1983 as part of a law that strengthened Social Security’s finances.