Social Security Benefits: What You Need To Know for Retirement
Written by
Angela Mae
Edited by
Melanie Grafil
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Millions of Americans rely on Social Security to support them through their retirement years. For some, Social Security is their primary source of income. For others, it’s merely a supplement — but one that can still afford them a comfortable retirement lifestyle.
If you’re starting to look toward retirement, it’s important to be prepared. Here are some things you should know about your Social Security benefits.
Full Retirement Age and Maximum Benefits
You’ll need to reach full retirement age (FRA) to receive full retirement benefits. The FRA depends on what year you were born. For example, those born in 1960 or later will have to wait until they’re 67 to receive full benefits. Waiting until you’re older to collect benefits — age 70 — could get you an even higher benefit amount.
Either way, you’ll probably want to maximize your benefits.
“The first step: Consider working for at least 35 years,” said Neal Shah, founder and CEO of CareYaya. “Social Security calculates your benefit based on your 35 highest-earning years. [A] big help is maximizing your earnings throughout your career. That can also boost your benefits.”
You can use an online calculator to get a better idea of what your benefit amount might be based on your date of birth, earnings in the current year, and expected retirement date.
Social Security Is a Foundation
The average monthly Social Security benefit in 2024 is $1,907, though some people receive a much higher — or lower — amount. The higher your earnings, the higher your benefits tend to be. That said, Social Security was designed to supplement retirement income, not cover the entire cost of living.
“I always stress that Social Security provides a foundation,” Shah said, “but it’s often not enough to cover all retirement expenses, especially long-term care costs.”
Stephen Kates, CFP and the principal financial analyst for Annuity.org, agreed.
“Social Security benefits are not a one-size-fits-all, and it can take some homework and strategy to make the most of it,” Kates said. “Don’t think of Social Security as separate from your other retirement income plans such as a 401(k) or IRA. Use it in conjunction with your other retirement assets and income sources.”
Medicare and Social Security
Medicare if a federal health insurance program for those age 65 and up. Social Security is what enrolls you in Original Medicare — that is, Medicare Parts A and B.
Like Social Security, Medicare can help you prepare for retirement, but it might not be enough.
“The most important thing I stress every day is to plan for healthcare costs,” Shah said. “Medicare doesn’t cover all expenses. Fidelity says a 65-year-old retiring today will face $165,000 in healthcare and medical expenses — more than twice what the average American expects.”
You can enroll in Original Medicare three months before you turn 65 or within three months after. If you miss the deadline, you may have to wait for coverage or pay a late enrollment penalty.
Know What Your Benefits Are
Of course, you’ll want to maximize your Social Security benefits in retirement. This involves knowing what your earnings are and what your benefits will actually be.
“Start by signing in to SSA.gov to review your expected benefits and make sure your earnings history matches your expectations,” Kates said. “Your Social Security benefits are based on the highest 35 years of your work history; so, if you are missing any years, it can hamper your benefits amount.”
If anything looks incorrect, you can contact the Social Security Administration at 1-800-772-1213 to dispute it.
You May Not Be Able To Change Your Benefits Later
Once you decide to start collecting Social Security, you might not be able to make any changes later.
“Social Security is an excellent source of guaranteed retirement income and should be protected [because], once you claim, you can’t necessarily go back and fix it,” Kates said. “If you expect to live past your early 80s, you will likely benefit from waiting as long as possible (max age of 70) to claim. Withdrawing from other accounts or using a period-certain annuity can help bridge the gap.”
You Can Work and Still Receive Benefits
It’s possible to receive Social Security retirement or survivor benefits while still working, but there are certain limitations to be aware of.
If you haven’t reached the full retirement age yet, the SSA will deduct $1 from your benefit amount per every $2 you earn above the yearly limit — currently $22,320. If you have reached the FRA, the SSA will deduct $1 from your benefits per $3 you earn. In this case, the earnings limit is $59,520.
Income from pensions, investments, annuities, veterans benefits, military or government benefits and interest won’t count toward your earnings, and so it won’t be deducted. Wages, vacation pay and commissions do count, however.
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