Sections in The Ultimate Guide to Senior Finance:

1. Benefits and Social Security
2. Budgeting and Saving
3. Consumer Protection
4. Health Care Costs
5. Different Types of Insurances
6. Taxes and Tax Planning
7. Mortgage Strategies
8. Wills and Trusts
9. Other Financial Resources

Benefits and Social Security

Social Security was designed as a “safety net” of sorts. Aside from your personal savings, and an employer pension, Social Security provides you with the money you’ll need during your retirement. This benefit plan reaches nearly every family in America and is a significant source of income for many seniors.

There are about 38 million people who rely on Social Security for at least part of their income, and this number continues to grow as more and more people retire. Understanding how your benefits work will allow you to make the most of it.

More Than Retirement

The most popular view of Social Security is that it is merely retirement income. However, there are actually several types of benefits paid out under the Social Security plan. The program pays benefits for the disabled, pays money to a spouse or child of someone who receives benefits, pays money to a spouse or child of a worker to died, or pays money to a dependent parent of a worker who died.

Because Social Security provides more than just retirement income, you may be eligible for Social Security prior to retirement, depending on your circumstances.

Retirement Income

During your working lifetime, you pay Social Security tax and earn “credits.” As of 2012, you earn 1 credit for every $1,130 you earn. You get a maximum of 4 credits per year. You will generally need 40 credits to be eligible for Social Security. This usually translates into at least 10 years of work.

Choosing when you retire dramatically impacts some of your benefits. If you choose to retire before your full retirement age, for example, you’re retirement benefits paid under the Social Security system will be lower than if you had waited until your full retirement age.

If you were born between 1943 and 1960, for example, your full retirement age would start out at age 66 (if you were born in 1943) and gradually increase to age 67 (if you were born in 1960). If you delay taking benefits beyond your full retirement age, you’ll receive a gradual increase in your benefit amount until you start taking benefits or until you reach age 70, whichever comes first. On the other hand, you can always decide to take your Social Security benefits early. However, if you do, you’re income will be chopped down. At age 62, you may start taking benefits at a reduced rate of 1 percent for each month you start your benefit payment before your full retirement age.

That means that if your full retirement age is 66, and you sign up for Social Security when you’re 62, then you would only receive 75 percent of your full benefit amount.

You may also continue working while receiving benefits. However, if you do, you may receive reduced benefit payments. In general, if you receive benefits before your full retirement age, $1 in benefits will be deducted for each $2 in earnings you have above the annual limit. In 2012, this limit is $14,640.

In the year you reach full retirement age, your benefits are reduced $1 for every $3 your earn over the annual limit. Obviously, working and receiving benefits is possible, but far from idea. You paid in a lot of taxes. Consider holding off on taking benefit payments until you absolutely need them.

Disability Benefits

Social Security pays a disability benefit if you become disabled. This benefit payment is a little different from the private plans you might be used to. If you qualify for benefits under another government or private disability plan doesn’t, you will not necessarily qualify for benefits under Social Security. For example, most companies and government agencies consider a note from your doctor as mostly or totally satisfying the…

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