Who Should Read This Document?

If you are thinking about retiring, you should read this document. The decisions you make about your retirement will be some of the most important decisions you'll ever make. And because Social Security is part of the retirement plans of almost every worker in the United States, you will find information in this document to help you plan for those years. You'll find explanations of how to qualify for Social Security benefits, how your earnings and age affect your benefits, and how to choose your retirement date. You'll also find information about Social Security's future and where your Social Security tax dollars go.

Your monthly benefits are only one part of your retirement. When you retire, your lifestyle will probably change. You may be faced with decisions about such things as planning additional leisure time or making a residence change. If you want help with other aspects of retirement, you may want to contact your local Area Agency on Aging. You'll find the number in your telephone directory.

Please Note: This document provides a general overview of Social Security retirement benefits. The information it contains is not intended to cover all provisions of the law. For specific information about your case, contact Social Security.

Although this document contains information about retirement benefits, there's more to Social Security than retirement. It's a comprehensive package of protection that also provides benefits to workers and their dependent family members if they become disabled or die. To learn more about the other benefits Social Security provides, call and ask for a copy of Social Security Understanding The Benefits(Publication No. 05-10024).

Social Security's Future...And Yours!

Many people wonder where their Social Security tax dollars go. Generally, out of every dollar you pay in Social Security taxes:

• 70 cents goes to a trust fund that pays monthly benefits to retirees and their families and to widows, widowers, and children of workers who have died;
• 19 cents goes to a trust fund that pays for the health care of all Medicare beneficiaries; and
• 11 cents goes to a trust fund that pays benefits to people with disabilities and their families.

Your Social Security taxes also pay for administering Social Security. The administrative costs are paid from the trust funds described above and are less than one cent of every Social Security tax dollar collected.

Money not used to pay benefits and administrative expenses is invested in U.S. government bonds, generally considered the safest of all investments. The government uses the money it has borrowed from Social Security—just as it uses money you may have invested in savings bonds—to pay for all the services and projects it provides for our citizens. And just as the government pays you interest on your bonds, so will it make good on its obligations to Social Security.

You also need to know about Social Security's financial stability. Each year, Social Security's Board of Trustees reports on the financial status of the Social Security program. These reports are valuable tools for evaluating and ensuring the economic health of the Social Security system. The latest report indicates that the Social Security system, as currently structured, will be able to pay benefits well into the next century. This means Congress has the time it needs to make changes to safeguard the program's financial future.

You can count on Social Security being there when you need it.

What's Inside

Part 1—About Your Retirement Benefits

How Do You Qualify For Retirement Benefits?
How Much Will Your Retirement Benefit Be?
Full Retirement Age
Early Retirement
Delayed Retirement
Choosing Your Retirement Date
Retirement Benefits For Widow(er)s

How Do You Qualify For Retirement Benefits?

The number of credits you need to get retirement benefits depends on your date of birth. If you were born in 1929 or later, you need 40 credits (10 years of work). People born before 1929 need fewer than 40 credits (39 credits if born in 1928; 38 credits if born in 1927; etc.).

If you stop working before you have enough credits to qualify for benefits, your credits will remain on your Social Security record. If you return to work later on, you can add more credits so that you qualify. No retirement benefits can be paid until you have the required number of credits.

If you're like most people, you will earn many more credits than you need to qualify for Social Security. These extra credits do not increase your Social Security benefit. However, the income you earn while working will increase your benefit, as you will learn in the next section.

How Much Will Your Retirement Benefit Be?

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 waited until a later age.

Important Notice: Social Security will give you a personalized benefit estimate at your request. Call SSA's toll-free telephone number,1-800-772-1213, to ask for a Form-7004, (Request for Earnings Benefit Estimate Statement). Within four to six weeks after you complete and return the form to Social Security, you will receive a statement of your earnings record and estimates of your Social Security benefits for early retirement, full retirement and retirement at age 70. We'll also give you an estimate of the disability benefits you could receive if you become severely disabled before you 're eligible for full retirement, as well as the amount of benefits payable to your spouse and other eligible family members due to your retirement, disability or death. If you are age 60 or older, you can get an estimate of your retirement benefits by calling SSA's toll-free number.

Full Retirement Age

Because of longer life expectancies, the full retirement age will be increased in gradual steps until it reaches age 67. This change starts in the year 2003, and it affects people born in 1938 and later.

Look at the table on Page 5 to find your full retirement age.

Early Retirement

Here's how it works. If your full retirement age is 67, the reduction for starting your benefits at 62 is about 30 percent; at age 63, it's about 25 percent; at age 64, about 20 percent; at age about 13 percent; and at age 66, about 6 percent.

As a general rule, early retirement will give you about the same total Social Security benefits over your lifetime, but in smaller amounts to into take account of the longer period you will receive them.

Some people stop working before they reach age 62. In that case, it's important to remember that during years with no earnings, you miss the opportunity to increase your benefit amount by replacing lower earnings years with higher earnings years.

Important Notice: Sometimes poor health forces people to retire early. If you are unable to continue working because of poor health, you should consider applying for Social Security disability benefits. The amount of the disability benefit is the same as a full, unreduced retirement benefit. If you are receiving Social Security disability benefits when you reach age 65, they will be converted to retirement benefits. For more information, call SSA to ask for a copy of the document Disability Benefits (Publication No. 05-10029).

Delayed Retirement

• Each additional year you work adds another year of earnings to your Social Security record. Higher lifetime earnings may result in higher benefits when you retire.
• In addition, your benefit will be increased by a certain percentage if you delay retirement. These increases will be added in automatically from the time you reach your full retirement age until you start taking your benefits, or you reach age 70. The percentage varies depending on your year of birth. See the chart below for the increase that will apply to you.

For example, if you were born in 1943 or later, we will add eight percent per year (2/3 of one percent per month) to your benefit for each year you delay signing up for Social Security beyond your full retirement age.

Important Notice: If you decide to delay your retirement, be sure to sign up for Medicare at age 65. In some circumstances, medical insurance costs more if you delay applying for it.

Choosing Your Retirement Date

It may be to your advantage to have your Social Security benefits start in January, even if you don't plan to retire until later in the year. Depending on your earnings and your benefit amount, it may be possible for you to start collecting benefits even though you continue to work. Under current rules, many people can receive the most benefits possible with an application that is effective in January.

If you are not working, or your annual earnings are under the earnings limits explained later (see "If You Work And Get Social Security At The Same Time"), or you plan to start collecting your Social Security when you turn 62, you should apply for benefits three months before the date you want your benefits to start.

Because the rules are complicated, we urge you to discuss your plans with a Social Security claims representative in the year before the year you plan to retire.

Retirement Benefits For Widow(er)s

Benefits For Family Members

Spouse's Benefits

If you're eligible for both your own retirement benefits and for benefits as a spouse, we always pay your own benefit first. If your benefit as a spouse is higher than your retirement benefit, you'll get a combination of benefits equaling the higher spouse benefit.

Here's an example:

Mary Ann qualifies for a retirement benefit of $250 and a wife's benefit of $400. At age 65, she will receive her own $250 retirement benefit and we will add $150 from her wife's benefit, for a total of $400. If she takes her retirement benefit at any time before she turns 65, they will be reduced.

Maximum Family Benefits

• your wife or husband age 62 or older;
• your wife or husband under age 62, if she or he is taking care of your child who is under age 16 or disabled;
• your former wife or husband age 62 or older (see “Benefits For A Divorced Spouse”);
• children up to age 18;
• children age 18-19, if they are full-time students through grade 12; and
• children over age 18, if they are disabled.