Social Security Benefits

How Do Social Security Benefits Work During Retirement?

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Many people already know that Social Security Retirement Benefits is money that is received once you reach a certain age. But what age is the best age to take your benefits? How much will you receive? Can you still work? Many people do not truly have a grasp of all of the rules of social security.

Social Security is the retirement benefits that you can receive anytime after age 62. However, the longer you wait the more money you will receive if you take your benefits later. Most people wait until after they are full retirement age to take their benefits as there is a 25-35% increase, depending on what age you take the benefit. Your benefit amount depends on how much you have contributed to the system.

What is Full Retirement Age (FRA)

The full retirement age is 66 if you were born from 1943 to 1954. The full retirement age increases gradually if you were born from 1955 to 1960 until it reaches 67. For anyone born 1960 or later, full retirement benefits are payable at age 67.

However, you can take your benefits early, at a reduced monthly amount. If you are in good health during your retirement, it is better to wait as long as possible to take your benefits if you want the maximum payout. At age 70 you will receive the highest amount allowed by Social Security vs. at age 62 when you will receive the least amount.

How Many Years Do I Have to Work to Get Social Security

Retirement benefits are earned by working and earning credits as you contribute to Social Security. The number of credits you need depends on your age and the type of benefits you are looking for. Anyone born in 1929 or later needs 10 years of work, which will equal 40 credits, to be eligible for retirement benefits. You earn Social Security credits when you work and pay into the system through your FICA payroll taxes.

Social Security bases your credits on your earnings. As an example, for 2020 you will receive one credit for each $1410 of earnings. You can earn up to 4 credits a year. You do not get additional credits if you earn more.

Everything you have contributed to Social Security over the years counts towards your eventual benefits. Each year the amount required to earn a credit goes up slightly so each year the earning requirement to earn your credits is different.

How Much Will I Receive in Social Security Benefits When I Retire?

How much you receive in social security benefits during retirement will depend on how much you paid into the program. You paid these benefits through the Federal Insurance Contributions Act (FICA) taxes that are withheld from your paycheck.

You can use the Social Security calculator to determine your benefits. The SSA offers several calculators to assist you in your retirement planning.

Your social security benefits are based on the years you work. They will take the highest 35 years of earnings. If you have less than 35 years where you worked they will calculate a 0 for the years you were not employed or contributing. As you continue to work you will eliminate those zero years and increase your benefit amount.

Social Security Benefits

Do I Have To Keep Paying Into Social Security Once I Retire?

As long as you are no longer working or earning wages you do not have to pay into Social Security. Once you take a job at any point they will start to collect FICA taxes again. But this can increase your benefit, so if you are looking for additional income this is a great way to increase your monthly benefits. All earned income will have to pay into the Social Security system.

Can I Still Work If I Am Receiving Social Security Retirement Benefits?

If you are still working and have earned income or wages, you will have to continue to pay into social security, even if you are collecting benefits and past full retirement age.

You will also want to be aware of benefit reductions if you are making too much money. If you’re younger than your full retirement age and earn more than certain amounts, depending on the year, your benefits will be reduced. The amount that your benefits are reduced, however, are not really lost. Your benefit will increase at your full retirement age to account for benefits withheld due to earlier earnings.

If you continue to work past your full retirement age, you can continue to increase your benefits without a reduction.

How Work May Affect Your Benefits

If you were born January 2, 1958, through January 1, 1959, then your full
retirement age for retirement insurance benefits is 66 and 8 months. If you work and are full retirement age or older, you may keep all of your benefits, no matter how much you earn. If you’re younger than full retirement age, there is a limit to how much you can earn and still receive full Social Security benefits. And if you’re younger than full retirement age during all of 2020, $1 will be deducted from your benefits for each $2 you earn above $18,240.

One important consequence to remember is this can also mean higher Medicare premiums and higher taxes. You want to make sure you look at all aspects of your financial situation when deciding to continue work after full retirement age.

Will My Spouses Pension or Income Affect My Social Security?

No. Your retirement benefit is based on individual earnings. However, if you are receiving spousal benefits your overall income could affect that amount.

  • If you and your spouse have similar incomes and ages, you may want to consider delaying your benefits, if you are in good health. This will increase the amount of your Social Security benefits.
  • Make sure if there is a significant difference in your income, look into claiming the spousal benefit. You may qualify for a higher payout.
  • If you have health concerns that may result in a shorter life expectancy, you will want to claim your benefits before full retirement age.

Are Social Security Benefits Taxable?

It is not that you have to pay taxes on your social security but if you are drawing an income in addition to Social Security you will be required to pay taxes.

You will pay tax on only 85 percent of your Social Security benefits, based on Internal Revenue Service (IRS) rules. If you:

  • File a federal tax return as an “individual” and your combined income is
    1. between $25,000 and $34,000, you may have to pay income tax on up to 50 percent of your benefits.
    2. more than $34,000, up to 85 percent of your benefits may be taxable.
  • File a joint return, and you and your spouse have a combined income that is
    1. between $32,000 and $44,000, you may have to pay income tax on up to 50 percent of your benefits.
    2. more than $44,000, up to 85 percent of your benefits may be taxable.
  • File a married but separate tax return, you probably will pay taxes on your benefits.

You can pay quarterly or have the taxes taken from your benefits check directly.

What Happens to My Benefits When My Spouse Dies?

If your spouse has reached full retirement age, the surviving spouse is eligible to collect 100 percent of the late spouse’s benefits. However, if your benefits are higher than your spouses then Social Security will not pay any additional funds.

Here is the scenario:

Spouse 1 earns $1500 per month and passes away after full retirement age. Spouse 2 earns $800 per month and survived spouse 1 and is over the age of 60. Once spouse 1 passes, spouse 2 will now earn $1500 per month instead of $800 per month.

Keep in mind, that if your spouse took their benefits early and passed after they turned full retirement age you will only be eligible to collect the lower amount. As long as the surviving spouse is at least 60, you will most likely qualify for survivor benefits. You will have to have been married for at least 9 months.  

If you have remarried before the age of 60 then you will not be able to collect survivor benefits. If the marriage ends then you can become eligible for your previous spouse’s benefits.

How Do I Get Social Security If I Have Never Worked?

Even if you have not worked during your lifetime, you still may be eligible for Social Security Benefits. You can receive up to one half of your spouse’s benefits at age 62. However, if you wait until full retirement age then you will receive a higher amount.

When your spouse dies you will receive 100% of your spouse’s death benefit. This amount will be higher than your spouse’s benefit. But as with all Social Security, if you take any benefits before full retirement age, your benefits will be less than you would get from waiting.

What Is The Best Age To Start Taking My Benefits From Social Security

When it comes to Social Security Benefits it is always better to wait as long as possible to take your benefits but you will have to weigh out your personal situation. If you are in poor health, then you should take your benefits as soon as you are eligible. If you are in better health then waiting can add an additional 25-35% to your monthly payments.

Everyone is eligible to receive their benefits starting at age 62. Your full retirement age will depend on your birth year. The full retirement age is 66 if you were born from 1943 to 1954. The full retirement age increases gradually if you were born from 1955 to 1960 until it reaches 67. For anyone born 1960 or later, full retirement benefits are payable at age 67. If you can wait until age 70 you will receive the highest amount available from Social Security.

Wrap up

Once you learn the rules surrounding your Social Security benefits, the system is pretty straight forward. The longer you wait to take your benefits, the more you will receive. I recommend using the calculators once a year to review where you stand as you approach retirement age. This way you will not have any surprises when you start your retirement.

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52 responses to “How Do Social Security Benefits Work During Retirement?”

  1. Danielle Ardizzone Avatar
    Danielle Ardizzone

    This is such useful information – I’m sure that so many people (myself included) have no idea of where to begin when planning for retirement, so this is great to start with. Thanks.

    1. Tricia Snow Avatar

      Seeing what Social Security provides is a great motivator!

  2. Cindy Avatar

    Excellent info about drawing social security!

  3. Melissa Jones Avatar
    Melissa Jones

    Great info! I’m no there yet, but will be needing that info!!

    1. Tricia Snow Avatar

      Awesome! It is never too early to start planning!

  4. Marianne Avatar

    So many things to consider! And its never too early to start thinking about your retirement strategies.

    1. Tricia Snow Avatar

      Exactly! It is definitely a journey!

  5. Sabrina DeWalt Avatar
    Sabrina DeWalt

    Thanks for the information. It’s still confusing, but you answered a question I’ve had.

    1. Tricia Snow Avatar

      Feel free to shoot me an email if you need assistance working it out. I am happy to help!

  6. Lisa, Casey, Barrett Dog Avatar
    Lisa, Casey, Barrett Dog

    Thank you for the excellent information!

    1. Tricia Snow Avatar

      You’re welcome Lisa!

  7. Kendra Avatar

    This is such great information about retirement and Social Security Benefits. I’m glad you included the part about how working while collecting benefits can affect the amount you receive depending on how much you make and that you still pay in while working. We had to navigate this a few years ago with my parents.

    1. Tricia Snow Avatar

      Yes there are many people who are unaware of this! Thanks Kendra!

  8. Tiffany Smith Avatar
    Tiffany Smith

    This is so interesting! My mom was talking about this but now I understand better what she meant so thank you!

    1. Tricia Snow Avatar

      Awesome Tiffany! Hopefully, she is all squared away!

  9. Ayesha Siddiqui Avatar
    Ayesha Siddiqui

    I wonder if there’s a way to check how many credits you have? A really informative article, thanks for sharing!

    1. Tricia Snow Avatar

      Yes, you can go to the Social Security website and register for an account. You can find a link in the article.

  10. Barbara Avatar

    Really great advice and information!

  11. Chelsea Avatar

    It’s so important to look into this early. I want to know exactly how much I’ll make each month after I retire so I go into it prepared.

    1. Tricia Snow Avatar

      Exactly! Of course, with market fluctuations and other variables, things can be different when you get there. But the calculators on the internet are great to at least know where you stand in general and make sure you are at least putting enough away to live.

  12. Keirsten Avatar

    Great info. You always give me so much to think about for the future.

    1. Tricia Snow Avatar

      I am glad! They do not address any of this in schools. It is an important part of your long term life plan.

  13. Sydney Avatar

    Great information!! Social Security is confusing sometimes, glad you spelled it out!

  14. Roselyn Franke Avatar
    Roselyn Franke

    Good information to know; thanks for sharing.

  15. Debbie Avatar

    I agree, work as long as possible is a good plan!

    1. Tricia Snow Avatar

      Yes there are many factors to consider, but if you do not need the money keep it with Social Security. There is a big difference in the payments.

  16. Holly Avatar

    Fantastic information! We all should be aware of the ins and outs of social security!

    1. Tricia Snow Avatar

      Yes! The more people that understand social security the more prepared they can be.

  17. Suzan Avatar

    Wonderful breakdown of SS. A few years down the road still, but always good to keep up with it all!

    1. Tricia Snow Avatar

      It is an important part of your long-term plan as a su[pplement to your retirement.

  18. Elaina Avatar

    Thank you for explaining this. It all gets a bit confusing.

    1. Tricia Snow Avatar

      My pleasure Elaina! I am passionate about financial health!

  19. Julie Gazdecki Avatar
    Julie Gazdecki

    Not quite there, but very helpful for the future.

  20. Leeanne Miller Avatar
    Leeanne Miller

    This is great information about Social Security. I didn’t realize that they have changed the age to get your money. My husband and I were born after 1960 so we can’t get money til we are 67 yrs old. He wanted to retire at 57! We’ll see but at least we now know we need to plan for extra years without full social security benefits.

    1. Tricia Snow Avatar

      Exactly! We set up ourselves to have a fairly passive income from our rental properties and now we have the freedom to leave Social Security alone until we are older.

  21. Kristen Avatar

    I loved all this information about Social Security benefits and retirement. My husband and I are in our 50s so we definitely need to be learning about this. You have so much great info here!

    1. Tricia Snow Avatar

      Thanks Kristen! I am glad you found it helpful~

  22. kmf Avatar

    You always have the best information about retirement. Greatly appreciate all these helpful tips when it comes to social security and retirement benefits.

  23. Lisa Avatar

    So interesting! I really did learn a lot.

  24. Alexis Farmer Avatar
    Alexis Farmer

    wow, just learned lots about social security! I used to have patients ask me about social security but had very little I could tell them lol. If they do now I’ll know a little more at least!

    1. Tricia Snow Avatar

      Awesome! It is never too early to start planning for Retirement~

  25. heather Avatar

    Great article. I have never really given it much thought as to how it all worked. I am saving this for future reference.

    1. Tricia Snow Avatar

      Thanks Heather! Many people find it mysterious so you are not alone.

  26. alison netzer Avatar
    alison netzer

    This is such a thorough post on Social Security benefits and retirement. I worry that when I retire the Social Security will have run out of money. Let’s hope not!

    1. Tricia Snow Avatar

      Most experts say it is unlikely. Only time will tell. It is a smart plan to have more of a nest egg though.

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