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3 Social Security Questions Answered

By Todd Campbell – Mar 5, 2016 at 8:02PM

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Motley Fool contributor Todd Campbell answers some important questions Americans may have about Social Security.


Baby boomers are turning 65 at a rate of 10,000 people per day, and that means that more Americans than ever before have critical questions about Social Security, the 80-year-old safety net for retired workers. If you're among the millions of Americans looking for answers to your Social Security questions, don't worry. We're here to help. Read on to get answers to three of the most important Social Security questions.

Question No. 1: When can I claim Social Security?
Retired workers will get 100% of their monthly Social Security benefit if they claim Social Security at their full retirement age. However, full retirement age isn't the same for everyone. If you're born before 1938, then your full retirement age is 65, but the full retirement age varies between age 65 and age 67 for everyone born after 1937. For example, the full retirement age for people born between 1943 and 1954 is 66, and the full retirement age for people born after 1960 is 67.


However, you don't have to wait until full retirement age to claim Social Security. You can choose to take Social Security as early as age 62, but if you do, your monthly Social Security income will be less than the 100% you would receive if you waited until your full retirement age instead. For example, a person with a full retirement age of 67 who claims Social Security at age 62 would receive 70% of their full retirement age income. Alternatively, you can delay taking Social Security until you reach age 70. Doing so gets you a monthly benefit that's higher than the 100% you'd receive at full retirement age. For example, people born after 1943 receive an annual 8% increase in their monthly benefit, up until age 70.

Question No. 2: How big will my Social Security check be?
You probably want to know how much money you'll receive in Social Security income because you're concerned about your financial security in retirement. If so, you're in good company. Only 22% of American workers are very confident about having enough money for a financially secure retirement, according to the Employee Benefit Research Institute.

Social Security replaces approximately 40% of the average retired worker's pre-retirement income, and in 2016, the average retired worker is receiving $1,341 in monthly Social Security income. If that doesn't sound like a lot, you're right.

Because Social Security income is meant to supplement income, rather than replace it, it's important to take advantage of all your retirement savings options, including workplace retirement plans and traditional and Roth IRAs. In 2016, people can contribute up to $18,000 to a workplace plan such as a 401(k) plan, and up to $5,500 can be contributed to an IRA. People over 50 years old that feel like they have some catching up to do can contribute an additional $6,500 catch-up contribution to a 401(k) and an extra $1,000 catch-up contribution to an IRA this year.

Question No. 3: Can I still work while collecting Social Security?
If you've taken Social Security before reaching your full retirement age and you've still got the bug to keep on working (or want a little extra money in your pocket), you can currently earn up to $15,720 a year without reducing your monthly Social Security income. If you earn more than $15,720, then your Social Security income will be reduced by $1 for every $2 in income you earn above that level.

Also, don't worry that any reduction to your Social Security income means that money is lost. It isn't. Any money that your monthly income is reduced by increases the amount of money you'll receive once you reach your full retirement age.

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