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March 26, 2014
Fact: It's likely that Social Security will provide a smaller portion of retirement income than you expect.
There's no doubt about it--Social Security is an important source of retirement income for most Americans. According to the Social Security Administration, more than nine out of ten individuals age 65 and older receive Social Security benefits.
But it may be unwise to rely too heavily on Social Security, because to keep the system solvent, some changes will have to be made to it. The younger and wealthier you are, the more likely these changes will affect you. But whether retirement is years away or just around the corner, keep in mind that Social Security was never meant to be the sole source of income for retirees. As President Dwight D. Eisenhower said, "The system is not intended as a substitute for private savings, pension plans, and insurance protection. It is, rather, intended as the foundation upon which these other forms of protection can be soundly built."
No matter what the future holds for Social Security, focus on saving as much for retirement as possible. You can do so by contributing to tax-deferred vehicles such as IRAs, 401(k)s, and other
employer-sponsored plans, and by investing in stocks, bonds, and mutual funds. When combined with your future Social Security benefits, your retirement savings and pension benefits can help ensure that you'll have enough income to see you through retirement.
Fact: Social Security also offers disability and survivor's benefits.
With all the focus on retirement benefits, it's easy to overlook the fact that Social Security also offers protection against long-term disability. And when you receive retirement or disability benefits, your family members may be eligible to receive benefits, too.
Another valuable source of support for your family is Social Security survivor's insurance. If you were to die, certain members of your family, including your spouse, children, and dependent parents, may be eligible for monthly survivor's benefits that can help replace lost income.
For specific information about the benefits you and your family members may receive, visit the SSA's website at www.socialsecurity.gov, or call
800-772-1213 if you have questions.
Note: Data may not total 100% due to rounding.
Source: Fast Facts & Figures About Social Security, 2013, Social Security Administration
Fact: Money you earn after you retire will only affect your Social Security benefit if you're under full retirement age. Once you reach full retirement age, you can earn as much as you want without affecting your Social
Security retirement benefit. But if you're under full retirement age, any income that you earn may affect the amount of benefit you receive:
Even if your monthly benefit is reduced in the short term due to your earnings, you'll receive a higher monthly benefit later. That's because the SSA recalculates your benefit when you reach full retirement age, and omits the months in which your benefit was reduced.
If you were born in: Your full retirement age is:
1955 66 and 2 months
1956 66 and 4 months
1957 66 and 6 months
1958 66 and 8 months
1959 66 and 10 months
1960 and later 67
Note: If you were born on January 1 of any year, refer to the previous year to determine your full retirement age.
Fact: You may have to pay taxes on your Social Security benefits if you have other income.
If the only income you had during the year was Social Security income, then your benefit generally isn't taxable. But if you earned income during the year (either from a job or from self-employment) or had substantial investment income, then you might have to pay federal income tax on a portion of your benefit. Up to 85% of your benefit may be taxable, depending on your tax filing status (e.g., single, married filing jointly) and the total amount of income you have.
For more information on this subject, see IRS Publication 915, Social Security and Equivalent Railroad Retirement Benefits.
This information, developed by an independent third party, has been obtained from sources considered to be reliable, but Raymond James Financial Services, Inc. does not guarantee that the foregoing material is accurate or complete. This information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. This information is not intended as a solicitation or an offer to buy or sell any security referred to herein. Investments mentioned may not be suitable for all investors. The material is general in nature. Past performance may not be indicative of future results. Raymond James Financial Services, Inc. does not provide advice on tax, legal or mortgage issues. These matters should be discussed with the appropriate professional.
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