Home PageAbout UsSearchContact UsServicesSite MapTax FAQsEst. Planning FAQsTax CourtLLC'sLLC's in For. JurisTax NewsReal Estate Tax FAQsTax PlanningGifts Reduce TaxLLC Op. AgreementBusiness PurchasesEmployer Tax IssuesMedical ExpensesBusiness PlanningFinance for BusinessW-2 ErrorsRetirement PlanningReal Est/LeasesTax CollectionsHome Sale ExclusionCash ProtectionTax AuditsTrips- Tax TreatmentLong Distance CreditBusiness Law FAQsEstate Planning/GiftEspanolBusiness AgreementsScams/Nigerian ScamsLatin Legal TermsLawsuits & ADRWorld BusinessMarketingBusiness AircraftNewsletter Sign-upLiability DisclaimerYear End Tax PlanElecting S CorpEmployment IssuesMartketing CustomersMarketing & SalesQuotesNegotiation Help Header1.jpg


  What Assumptions Can You Make 
  Under the Current System?

Will you be able to collect your Social Security benefits or even the contributions that you paid into the system? Where will the money come from? These questions are troubling many Americans, including President Bush and members of Congress.

A National Challenge

    "This year, the first of about 78 million baby boomers turn 60, including two of my Dad's favorite people — me and President Clinton. This milestone is more than a personal crisis — it is a national challenge. The retirement of the baby boom generation will put unprecedented strains on the federal government. By 2030, spending for Social Security, Medicare and Medicaid alone will be almost 60 percent of the entire federal budget. And that will present future Congresses with impossible choices — staggering tax increases, immense deficits, or deep cuts in every category of spending."

— President Bush,
2006 State of the Union address

The Social Security Administration has calculators to estimate your potential benefit amounts using different retirement dates and different levels of potential earnings. Click here to access the calculators.

Road to Retirement
How long before you can collect full benefits? This SSA chart tells you precisely that ... provided, of course, nothing changes:

Year of Birth

Retirement Age
to Receive Full Benefits

1937 or earlier



65 and 2 months


65 and 4 months


65 and 6 months


65 and 8 months


65 and 10 months




66 and 2 months


66 and 4 months


66 and 6 months


66 and 8 months


66 and 10 months

1960 and later


In his State of the Union address last week, January, 2006, President Bush proposed the creation of a bipartisan commission "to examine the full impact of baby boom retirements on Social Security, Medicare, and Medicaid." He noted that Congress failed to act on his proposal from last year to partially privatize the system but he warned "the rising cost of entitlements is a problem that is not going away."

After the speech, a White House spokesman said President Bush is not abandoning his controversial plan to reform Social Security by allowing people to divert some taxes into private investment accounts, but he is not pursuing the proposal as aggressively as last year.

So the long-term future of the system remains uncertain. That is even acknowledged in the statement of earnings you receive from the Social Security Administration (SSA) each year after age 25. The statement lists earnings over your working years. Based on those figures, the SSA estimates what your benefits should be when you reach retirement age. Yet the same statement also includes an ominous warning to future retirees: "We'll need to resolve long-range financial issues to make sure Social Security will provide a foundation of protection for future generations as it has done in the past."

One thing we know for sure about Social Security is the age to collect full benefits is creeping upward. In fact, depending on your birth date, if you hope to collect full benefits, you'll have to forget the notion of combining your 65th birthday party with your retirement party. Take a look at the right-hand chart for an estimate of how long you need to work under the plan as it stands today.

Here are some other assumptions you can make under the current system to help plan for retirement benefits:


Approximately 60 percent of working people choose to start receiving reduced Social Security benefits at age 62. When considering this election, look at your health and your family's history of longevity.

From a mathematical standpoint, it takes approximately 12 years for someone electing benefits at age 65 to receive the same total benefits as someone electing reduced benefits at age 62, assuming both individuals have the same earnings. So if you start collecting full benefits at 65, by age 77 you will have collected just slightly more than a 77 year old who began collecting at age 62.

Of course, no one knows how long they will live, but if you're healthy and expect to live a long life, it might be worthwhile to wait until your full retirement age.

Benefits for
a Spouse

Suppose your spouse hasn't worked enough to earn the minimum credits to qualify for benefits. Can he or she collect Social Security?

According to the SSA, even if your spouse has never worked, he or she can, at full retirement age, receive a benefit equal to one-half of your full benefit. Or your spouse can receive benefits at age 62 but the amount will be reduced.

What if your spouse worked but didn’t earn much? The SSA will pay retirement benefits on your spouse’s record of earnings first. But if the spousal benefit on your record is higher, your spouse will get a combination of benefits that equals that higher amount.

Working After Retirement

If you choose to retire before full retirement age but continue to work part-time to earn some money, you might forfeit some benefits. Based on current laws, let's say you begin collecting Social Security at 62. If you have a job and earn more than the current limit of $12,480, your benefits will be reduced $1 for every $2 you earn.

If you expect to earn wages substantially above these limits, you may want to delay receiving benefits.

Note: This only applies to earned income. You can have unlimited unearned income without losing any Social Security benefits. There is no limit on unearned income from sources such as retirement plans, annuities, interest, dividends, and capital gains.

for Benefits

The SSA uses its record of your lifetime earnings, listed on your annual statement, to calculate your benefit "credits." In 2006, to earn one credit, you must have received $970 of wages or self-employment income during the quarter. You can earn a maximum of four credits per year. Generally speaking, in order to qualify for Social Security benefits, you must have earned a minimum of 40 credits. In other words, you must have worked 40 quarters. In your lifetime, you will probably earn far more credits than you need to qualify. However, extra credits do not increase benefits.

Whatever decisions you make regarding retirement, don't plan to rely on Social Security alone. Even today, the full benefit is only enough to provide a supplement for most people, rather than the entire nest egg. And given the changing nature of Social Security, there's no way to know what will happen in the future.

Of course, we all hope to see the money we paid into the system. But while politicians debate how to overhaul Social Security, the rest of us need to be feathering our own nests with savings in private retirement accounts. Consult with your financial or tax adviser on ways to create a retirement plan for you to follow.

Virtualex.com Ronald J. Cappuccio, J.D., LL.M.(Tax) 1800 Chapel Avenue West Suite 128 Cherry Hill, NJ 08002 Phone:(856) 665-2121      Fax: (856) 665-9005 Email: ron@taxesq.com

Home Page | About Us | Search | Contact Us | Services | Site Map | Tax FAQs | Est. Planning FAQs | Tax Court | LLC's | LLC's in Foreign Countries | Tax News | Real Estate Tax FAQs | Tax Planning | Gifts Reduce Tax | LLCs Need Operating Agreements | Business Purchases | Employer Tax Issue | Medical Expense Deductions | Business Planning | Finance for Business | W-2 Errors | Retirement Planning | Real Estate and Leases | Tax Collections | Home Sale Exclusion | Cash Protection Security | Tax Audits | Tax Treatment of Trips | Long Distance Tax Credit | Business Law FAQs | Estate Planning/Gifts | Espanol | Business Agreements | Scams & Nigerian Scams | Latin Legal Terms | Lawsuits & ADR | World Business | Marketing | Business Aircraft | Newsletter Sign-up | Disclaimer of Liability | YEAR END TAX PLANNING | Converting to S Corporation Election | Employment Issues | Marketing.Customers | Marketing & Sales Ideas | Quotes | Negotiation Help