How Social Security benefits work
Your full retirement age, as defined by the Social Security Administration (SSA), isn’t necessarily the age you stop working. It’s based on your year of birth, which typically works out to somewhere between age 66 to 67. You can apply for your benefit starting at age 62, but your benefit will be reduced accordingly — and that reduction could be as much as 30%.
Your benefit is calculated using your average indexed monthly earnings (AIME), which is taken from your 35 highest-earning years and adjusted for wage levels and cost of living. The resulting calculation is called your primary insurance amount — the amount you’ll receive at full retirement age.
CNBC reported that the average Social Security benefit in June was $1,918. This, of course, will vary, depending on your AIME and the year you claim your benefit. However, if you have fewer than 35 years of work under your belt, that will impact the amount of your benefit.
When thinking about retirement, you should have a plan for savings that isn’t just pushing you to rely on your Social Security benefit to sustain your cost of living. For example, putting some money aside throughout your working years into retirement savings accounts — like a gold IRA.
A gold IRA is different from a traditional IRA as it combines the tax advantages of a traditional IRA with the inflation-hedging properties of investing directly in gold. This allows you to diversify your portfolio while also safeguarding your retirement savings against economic volatility.
With the help of Thor Metals, you can open a gold IRA that seamlessly integrates into your investment strategy. Similar to an automated savings platform, Thor Metals makes it easy to schedule regular contributions and manage your gold investments efficiently.
If you want to learn more about whether this is the right investment for you, you can get a free information kit
Understanding your Social Security benefits and determining how much you need to retire can also be overwhelming on your own. Consulting with a financial advisor for your retirement planning can help provide you with strategies aligned to your specific financial goals.
Zoe Financial is an online platform that helps connect consumers with a network of financial professionals, including accredited fiduciary advisors, who are vetted based on their credentials, education, experience and pricing.
Once you get matched with a financial advisor, you can book a free no obligation consultation to ensure they are the right match for you.
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If you’re considering a very early retirement — in your 30s or 40s — you’ll need to make sure you can afford to do so. Though you don’t require 35 years of work to claim your Social Security benefit, keep in mind the years you don’t work will drag down your overall average.
Social Security benefits are based on a sliding scale, which is designed to help low-wage earners who need retirement income most. In other words, higher earners get lower percentages of salary credit. Although, the less you earn overall, the smaller your benefit.
Keep in mind, if you retire before you’ve earned 40 Social Security credits, then you won’t qualify for Social Security benefits at all.
If you’re part of the FIRE movement and have money stashed away in a 401(k) and/or IRA, you can start withdrawing funds at age 59-and-a-half, without having to pay a penalty. But before you retire, you’ll need to aggressively save and invest, because you’ll need enough to live on before you can claim Social Security — and possibly enough to supplement your lowered benefit for 30-plus years.
If you’re looking to start saving towards early retirement, explore the Moneywise list of the Best High-Yield Savings Account of 2024 so you can choose the best option to grow your money.
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