Every U.S. citizen is insured against old age, and if an insured event occurs (the general rule of thumb is reaching age 65), he or she may qualify for a pension.
Let’s review the main points about the U.S. state pension program, as well as the nuances of private pension insurance.
How pensions are counted
The US Social Security Administration is responsible for calculating pensions and gives people a Social Security Number.
Working people pay a so called pension tax which is 7.65% of income if total annual income does not exceed $65,000. 6.2% goes toward paying toward a future pension, and 1.45% goes toward medical care. Interestingly, if your income is over $65,000, only 1.45% is charged.
Note: this amount is paid by the employee. At the same time, the employer is required to pay exactly the same contribution, and thus the pension savings are actually 15% of income.
As a rule, the retirement age is 65, but for people with disabilities it can be less – 62 years.
True, in the latter case, three years not worked will affect the amount of pension, which will be slightly lower. If the insurance experience (that is, the period when pension contributions were paid) is less than 10 years, the pension is not paid at all, and the citizen has the only way out – to apply for a poverty benefit.
A U.S. citizen can also contribute to a funded pension plan to build up a funded pension in the future. After 5-7 years a person who contributes to the funded fund will be able to access these funds.
Quite a number of Americans receive a funded pension as a supplement to their basic pension. There are two types of pension savings: public and private.
Personal Retirement Account
Apart from the state basic and funded pension, a citizen can open a personal retirement account. Here he may transfer sums of money that are not tied to taxes or insurance contributions. The annual threshold for money that can be contributed is $2,000.
At age 60 you can withdraw this money, but once a retiree reaches age 80 this account will be closed.
Many people are not as interested in the pension system as in the actual retirement benefits paid to American citizens. The average pension in the United States is 1300-1400 dollars, which is one of the highest in the world. And this is despite the fact that this does not take into account people’s savings formed in a savings fund.
We recommend to look at. In America it is customary to think about your pension long before you retire. It’s not uncommon to turn to a financial advisor to calculate your savings.