Most people have three possible sources of retirement income: (1) Social Security, (2) pension payments, and (3) savings and investments. The income that will have to be provided through savings and investments (which you can plan for) can be determined only after you have estimated the income you can expect from Social Security and from any pension plans (over which you have little control).
Social Security
Estimate how much you can expect in the way of Social Security retirement income. To do this, you should file a “Request for Earnings and Benefits Estimate” with the Social Security Administration. This form can be obtained from SSA by calling their toll-free number: 800-772-1213. You can also request a benefits statement online through the Social Security Administrations Web Site.
Planning Aid:
You can also request a benefits statement online through the Social Security Administration’s Web site.
Note: Many people are being sent estimates of their future Social Security benefits without having to make a request. You may have received such an estimate in the mail.
The amount of Social Security benefits you will receive depends on how long you worked, the age at which you begin receiving benefits, and your total earnings.
If you wait until your full retirement age (65 to 67, depending on your year of birth) to begin receiving benefits, your monthly retirement benefit will be larger than if you elect to receive benefits beginning at age 62. The full retirement age will increase gradually to age 67 by the year 2027.
Caution: Be aware that Social Security benefits may be subject to income tax. The basic rule is that if your adjusted gross income plus tax-exempt interest plus half of your Social Security benefits are more than $25,000 for an individual or more than $32,000 for a couple, then some portion of your Social Security benefit will be subject to income tax. The amount that is subject to tax increases as the level of adjusted gross income goes up.
Related Guide: Also, if you earn income while you are receiving Social Security, your benefit may be decreased. For the specific rule, see the Related Financial Guide: SOCIAL SECURITY BENEFITS: How To Get The Maximum.
Pension Plans
Estimate how much you can expect to receive from a traditional pension plan or other retirement plan. If you are covered by a traditional pension plan and you are vested, ask your employer for a projection of what you can expect to receive if you continue working until retirement age or under other circumstances-e.g., if you terminate before retirement age. You may already have received such an estimate.
If you are covered by a 401(k) plan, a profit-sharing plan, a Keogh plan, or a Simplified Employee Pension, make an estimate of the lump sum that will be available to you at retirement age. You may be able to get help with this estimate from your employer.
Tip: If you are in the military or formerly served in the military, contact the relevant branch of service to find out about retirement benefits.
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