Social Security is meant to be a reliable and stable form of income for people in retirement and is the most successful anti-poverty program in the United States. Receiving Social Security can be confusing in addition to your other retirement account disbursements, such as IRAs and 401(k)s. It is normal to be concerned about how Social Security will affect your retirement. Continue reading to help put your mind at ease about your Social Security benefits.

Social Security is meant to replace a portion of your retirement income based on the person’s lifetime earnings. The lifetime earning is based on your highest 35 years of earnings and depends on how much you have earned and when you decide to start receiving your benefits. Over your career, you pay taxes into Social Security to go to others who are currently receiving benefits. The money you pay is not specifically saved for you, but when you are ready to receive benefits, you will get the money that people are currently paying into the pool of money.

Typically, Social Security is 40% of your pre-retirement income. This helps you be able to estimate the benefits you will receive monthly.

Anyone who has worked and paid into Social Security will receive benefits if they reach a certain threshold. Over the time that you pay into Social Security, you earn “credits”. The number of credits you need in order to get the benefits depends on the year you were born and how many years you paid into Social Security. If you do not reach the 40-credit threshold, you will not receive Social Security benefits.

If you choose to continue working during retirement, you can increase your future Social Security benefits. Each year that you continue to work adds more earnings to your Social Security record. The higher the lifetime earnings, the higher your benefits.

Depending on what type of employment you had, your Social Security earnings calculation could be different than most Americans. These types of earnings include farming, federal government, household, military, nonprofit or religious organization, self-employment, state, and local government, and working outside the United States.

Pensions could impact your Social Security benefits. If you have a pension account from a job where you did not pay Social Security taxes, this can lower your retirement benefits. If you are a spouse, widow, or widower of someone who has a pension from a government job where they did not pay Social Security taxes. In certain situations, you may have to pay income taxes on your Social Security benefits.

If you are concerned about how Social Security can affect your retirement, Mooney Lyons is here to help! Our advisors can sit down with you and analyze your retirement portfolio to review the retirement benefits you will be receiving.