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Funding Your Future: how to earn Social Security benefits

Posted at 2:33 PM, Oct 11, 2017
and last updated 2017-10-11 16:33:39-04

Financial Expert Rachel Langlois from Cyprus Credit Union answers the important questions you should be asking before you retire.

How to earn Social Security Benefits

Last week we discussed building a plan for retirement and one piece of this plan can be Social Security benefits.

What is Social Security?

When you work you pay taxes into Social Security. It’s more than retirement. This money is used to pay benefits to:

  • Retired
  • Disabled
  • Survivors of workers who’ve died
  • Dependents of beneficiaries
  • Money isn’t held in a personal account, it pays people who are getting benefits now and unused money goes to the Social Security trust fund.

Where do Social Security funds come from?

  • You pay taxes based on your earnings up to a certain amount ($127,200/year)
  • 12.4% per worker, if employed you and your employer split (6.2% each)
  • 85% goes to trust fund for retirees, 15% goes to benefits for disabilities & their families
  • Efficiently managed =  less than 1 penny per dollar

How does Social Security help with retirement? 

  • Replaces about 40% of a wage earner’s income (based on 35 highest earning years)
  • Not meant to be sole source of income. You will need approx. 80% of your pre-retirement earnings so SS is meant to supplement private savings/pensions/investments
  • Currently 2.8 workers per beneficiary, in 2035 down to 2.2.  Americans 65+ will grow from 49M today to 79M in 2035
  • No minimum distribution, but there is a max, in 2016 it was $2,639.
  • Average benefit = $1,341 ($16k/year)

How do I qualify to receive benefits? 

  • Earn 40 credits (10 years of work)
  • $1300 = 1 credit, $5200 year = 4 credits
  • Full retirement benefits = 67 (for those born 1960 or later)
  • Early = 62 (reduce by .5%/mo), Delayed = 70

How do I know where I stand?

  • Log-in at ssa.govfor amount of credits earned
  • Calculators

For more information go to