It is well known that the welfare system in the United States is well-developed, which is one of the important reasons why more and more people have immigrated to the United States in recent years. So, how do new immigrants calculate their retirement benefits and retirement age after living in the United States? The WorldWay Immigration Group provides a detailed explanation as follows:
In the United States, the normal retirement age is 67 years, and early retirement is at 62 years. The United States encourages delayed retirement; if a person chooses to retire at 70 years or later, they can receive 132% of their retirement benefits each month. Therefore, it is common to see many elderly individuals still working in various service industries, private companies, and government departments. There are many reasons why people choose to delay retirement; some enjoy working and want to continue contributing, while many others wish to earn more money to ensure a more stable and prosperous retirement.
The U.S. Retirement Policy is Divided into Three Levels
1. Early Retirement
A person can start receiving retirement benefits at the age of 62, but the benefits will be reduced by 30%. For each month of delay in receiving benefits, the reduction will be less.
2. Normal Retirement
Depending on the date of birth, the United States Social Security Administration has set different "normal" retirement ages. For example:
For those born in 1937 or earlier, the retirement age is 65;
For those born between 1943 and 1954, the retirement age is 66;
For those born in 1960 or later, the retirement age is 67.
Individuals who retire at their "normal" retirement age can receive full retirement benefits.
3. Delayed Retirement
In the United States, there are many reasons why people choose to delay retirement; some enjoy working and want to continue contributing, while many others wish to earn more money to ensure a more stable and prosperous retirement.
Those who choose to delay retirement can receive additional benefits (Delayed Retirement Credits) on top of their original retirement benefits. If a person's normal retirement age is 66 years and they choose to retire at 67 years, they will receive 108% of their retirement benefits each month; if they choose to retire at 70 years or later, they will receive 132% of their retirement benefits each month.
This voluntary and gradual retirement system allows individuals to make choices based on their own circumstances. The tiered retirement benefit structure, especially the additional benefits for delayed retirement, encourages Americans to delay their retirement to some extent.
How Much Do Americans Know About Retirement Benefits?
The retirement benefits for the general public in the United States are Social Security Retirement Benefits. If employed by a company, individuals must pay 6.20% of their income in Social Security taxes, and the company must pay the same percentage; if self-employed, individuals must pay 12.40% in Social Security taxes.
Currently, the normal retirement age in the United States is 66 years, but for those born after 1960, it is 67 years. To qualify for retirement benefits, one must accumulate 40 credits, with each $1,130 of income counting as one credit, but a maximum of four credits can be earned per year, requiring at least ten years of work. If a spouse does not work or does not meet the work duration requirement, they can still receive a small amount of retirement benefits; if a spouse dies, the surviving spouse (who must be of retirement age) and any minor children will receive Social Security benefits.
How Are Retirement Benefits Calculated (in USD)
Step 1: Take the total annual income of the highest 35 years (adjusted for inflation; earning $50,000 in 1980 is certainly much more than earning $50,000 in 2010; the Social Security Administration has an annual inflation factor to convert to present value); if one has not worked for 35 years, take the income from all working years.
Step 2: Divide the total income by 35, then divide by 12 to get the average monthly income.
Step 3: Calculate the retirement benefits at normal retirement age (using 2012 as an example): the first $767 is calculated at 90%, the amount from $767 to $4,624 is calculated at 32%, and the amount above that is calculated at 15%.
For example, if someone's average monthly income is $4,762, their retirement benefits would be: $767 × 0.9 + ($4,624 - $767) × 0.32 + ($4,762 - $4,624) × 0.15 = $1,945.
Now Let's Look at the Retirement Benefits for Different Income Levels at Normal Retirement Age:
1. Minimum Wage Earners, such as cashiers and restaurant servers, earning $8 to $10 per hour, with an average monthly income of $1,400:
After working for 10 years, the retirement benefits would be $360;
After working for 20 years, the retirement benefits would be $701;
After working for over 35 years, the retirement benefits would be $892.
2. Average Income Earners, such as clerks, with a monthly salary of $2,000 to $3,000, with an average monthly income of $2,500:
After working for 10 years, the retirement benefits would be $643;
After working for 20 years, the retirement benefits would be $902;
After working for over 35 years, the retirement benefits would be $1,245.
3. Middle-Income Earners, such as elementary school teachers and journalists, with an annual salary of $40,000 to $50,000, with an average monthly income of $3,500:
After working for 10 years, the retirement benefits would be $765;
After working for 20 years, the retirement benefits would be $1,084;
After working for over 35 years, the retirement benefits would be $1,565.
4. High-Income Earners, such as professional white-collar workers, with an annual salary of $60,000 to $100,000, with an average monthly income of $6,000:
After working for 10 years, the retirement benefits would be $993;
After working for 20 years, the retirement benefits would be $1,542;
After working for over 35 years, the retirement benefits would be $2,131.
5. Top-Income Earners, such as management, earning over $110,000, with an average monthly income of $9,166:
After working for 10 years, the retirement benefits would be $1,283;
After working for 20 years, the retirement benefits would be $2,017;
After working for over 35 years, the retirement benefits would be $2,605.
Thus, the maximum retirement benefit is $2,605 per month. Currently, the average Social Security benefit received by Americans (as of March 2014) is $1,185 (this includes all Social Security recipients, the majority of whom are retirees, with an average retirement benefit of $1,298).
The Dual System of Retirement Benefits in the United States
Federal employees and local government employees generally do not participate in Social Security; they have their own pension plans, which typically accumulate 1% to 2% per year based on years of service. Retirement benefits are calculated based on the average of the highest income over 3 or 5 years, multiplied by the accumulated value. If one works for 35 years and accumulates 70%, with the highest income averaging $6,000 per month, then the retirement benefits would be $4,200, far exceeding Social Security retirement benefits.
There are over 20 million government employees in the United States, accounting for 15% of the labor force. Additionally, the proportion of high-income earners among government employees is significant, resulting in a substantial gap in retirement benefits between the two systems. Some departments, such as the postal service, have abandoned their pension plans in favor of the federal Social Security plan.
The 401K Retirement Plan in the United States
In addition to Social Security, the United States also has 401K or similar plans, which are supplementary retirement plans primarily funded by personal savings, with the government temporarily not taxing this portion of income (Social Security taxes and Medicare taxes cannot be exempted). Additionally, companies may also contribute a portion. Funds can be withdrawn after the age of 60, but income tax must be paid upon withdrawal. Since the income of the elderly is lower, the tax rate will be reduced.
As the world's largest economy, the United States attracts many high-end individuals from home with its superior living environment, abundant educational resources, sound social welfare system, and a more open and fair social atmosphere. In recent years, immigration to the United States has remained hot. The EB-5 investment immigration program in the United States has a low threshold and few conditions, making it essentially the only high-cost performance immigration method without language requirements, age limits, educational requirements, business background requirements, or immigration monitoring, thus favored by EB-5 investors. Currently, the EB-5 Act has been extended to December 8 through a temporary resolution, allowing investors to still immigrate to the United States at a low price of $500,000, and at this time, investments can also enjoy exchange rate benefits.
Now is the best time to immigrate to the United States; it is advisable to act sooner rather than later! If you are interested in immigrating to the United States, please feel free to call the WorldWay Immigration Group's national service hotline at 400-138-2929.
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