Your Social Security benefits are the foundation on which you can build a secure retirement. The three major elements of your retirement portfolio are:
Most financial professionals say you'll need about 70% of your pre-retirement earnings to comfortably maintain your pre-retirement standard of living. If you have average earnings, your Social Security retirement benefits will replace only about 40%. The percentage is lower for people in the upper income brackets and higher for people with low incomes. You'll need to supplement your benefits with a pension, savings or investments.
To help you plan for retirement, the Social Security website includes a Retirement Estimator that lets you get a retirement benefit estimate based on current law and real time access to your earnings record. It also provides a Benefits Planner to help in the event of disability or loss of your family's wage earner.
Factors that may affect your retirement benefits
Your benefit amount is based on your earnings averaged over most of your working career. Higher lifetime earnings result in higher benefits. If you have some years of no earnings or low earnings, your benefit amount may be lower than if you had worked steadily.
Your benefit amount also is affected by your age at the time you start receiving benefits. If you start your retirement benefits at age 62 (the earliest possible retirement age) your benefit will be lower than if you wait until your full retirement age. If you start your retirement benefits after full retirement age, the monthly benefit may be higher due to delayed retirement credits.
If you are self-employed
Self-employed people must report their earnings and pay the taxes directly to the IRS. You are self-employed if you operate a trade, business or profession, either by yourself or as a partner.
You report your earnings for Social Security when you file your federal income tax return. If your net earnings are $400 or more in a year, you must report your earnings on IRS Schedule SE for Social Security purposes, in addition to the other tax forms you must file.
If you work for a federal, state or local government
If you work for a federal, state or local government where you do not pay Social Security taxes, the pension you receive from that agency may reduce any Social Security benefits for which you are qualified. There are two factors that may reduce your benefits.
You can get more information on the website for Federal, State & Local Government Employees.
If you work outside the United States
If you work outside the United States (U.S.) for an American company or, in some cases, an affiliate company of an American company, you and your employer may have to pay Social Security taxes on the same earnings to both the U.S. and the foreign country. But, if you work in one of the agreement countries shown in our fact sheet, How International Agreements Can Help You:
You can get more information about work outside the U.S. on our International Programs http://www.ssa.gov/international/ website.
Prepare for your medical needs
Medicare is a health insurance plan for people who are 65 or older and people who are disabled or have permanent kidney failure. Medicare has three parts—hospital insurance, medical insurance and prescription drug coverage. Most people have all three parts.
If you are already receiving disability or survivors benefits when you apply for retirement
If you are receiving disability benefits when you reach full retirement age, nothing will change, except that your benefits will be called retirement benefits instead of disability benefits. If you are receiving survivor's benefits and you also are eligible for your own higher retirement benefits, you can switch from survivors to retirement benefits as early as age 62 or as late as age 70. In many cases, widows/widowers begin receiving one benefit at a reduced rate and switch to the other benefit at an unreduced rate at full retirement age. However, if you switch, you will be paid only the higher of the two benefits, not both.