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Potential Sources of Income

Social Security

"Social Security" is the Old-Age Survivor’s Disability and Health Insurance (OASDI) program of the federal government. Click here for a link to the Social Security Administration.

Workers who are "fully insured", and have reached age 65, may receive full benefits. Reduced benefits may be taken as early as age 62. (This will be increasing in future years.) Also, if the retiree has a spouse who is 65 or older, this spouse may also be entitled to benefits of one-half of the amount received by the worker; with a reduced amount also available at age 62. (This will also be increasing in future years.)

Benefits are calculated by a complicated formula, based on your compensation history. Personal Earnings and Benefit Estimate Statements are available from The Social Security Administration by calling 1-800-537-7005. It is important to be aware of your accruing benefits. This estimate will be needed in your Retirement Planning Calculations. Benefits are reduced for recipients under age 70 with earned income exceeding the following guidelines:

  • Age 62 – 64: Earned Income Limitation is $9120; beyond that, benefits are reduced by $1 for every $2 earned.
  • Age 65 – 69: Earned Income Limitation is $14,500; beyond that, benefits are reduced by $1 for every $3 earned.
  • At Age 70 and beyond, there is no current reduction in benefits for other earned income.

Pension plans and retirement programs

In recent years, employer-sponsored plans (especially those that are totally funded by the employer) have diminished, partly due to the rapidly rising cost of employee benefits and partly due to the ever-increasing and changing reporting and plan requirements imposed by the federal government.

If your employer is currently sponsoring a retirement plan, it is important to be aware of what your benefits will be, and how they are structured. There are two basic types of Qualified Retirement Plans, which may be offered by your employer:

  • A Defined Benefit Plan specifies the amount of benefit that you will receive at retirement. It may be stated as a specific dollar amount (i.e. $700 monthly, beginning at age 65); or it may be stated as a percentage or number of units based on your length of service, salary, and other criteria (i.e. 50% of your average monthly salary during the last three years of employment). If you are a participant in this type of plan, it makes your retirement calculations easier, since you know with some certainty what benefit you will be receiving from your plan.
  • A Defined Contribution Plan specifies the amount of contribution that will be made over the accumulation period. The amount of benefit that will be available is unknown, since it will be affected by time, the investment return and the amount of future contributions. For example, an employer’s plan may specify that it will contribute 3% of your annual salary each year to the plan on your behalf. But the amount available to you at your retirement will be based on when you retire, how well the plan’s investments have done over the years, and your actual earnings history, which establish the 3% contribution.