10 Things Every Working Person Should Know About Social Security

stack of social security cards
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If you’re not well versed on the ins and outs of Social Security, you may have a vague idea of how the program works. However, some of those notions may be inaccurate. For instance, you probably know that the more income you make, the less Social Security benefits you’ll likely receive in retirement. But do you know that you can work and still collect benefits?

GOBankingRates interviewed Martha Shedden, RSSA(r), CRPC, the president and co-founder of the National Association of Registered Social Security Analysts, to get her take on things every working person should know about Social Security. She based her responses on data from Nationwide Retirement Institute’s 2021 Social Security Survey. From the eligible age to receive benefits to the fact that Social Security isn’t likely to run out anytime soon, here’s what you should know about Social Security. 

1. The Eligible Age To Receive Benefits

“According to the survey, two in five people don’t know the eligible age to receive full benefits,” Shedden said. “You are eligible to receive your full benefit (PIA, Primary Insurance Amount) at your Full Retirement Age (FRA). If you choose to claim your benefit earlier than your FRA (as early as age 62), your monthly payment will be reduced. If you choose to claim your benefit after your FRA, your monthly payment will be increased up until age 70. Your FRA is dependent on the year you were born.”

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2. How Survivors Benefits Work

“Survivors benefits are Social Security benefits paid to widows, widowers and dependents of deceased eligible workers,” Shedden said. “The maximum survivor benefit one may be eligible to receive is 100% of what the deceased spouse was collecting or what they would have been collecting at the time of their death. The exact amount of survivor benefits is dependent on several variables and there are also certain minimum amounts that the SSA pays to survivors.”

3. Benefits May Be Available for Your Spouse or Children 

“Many people don’t know that Social Security may offer benefits for spouses and/or children,” Shedden said. “To be eligible to receive spousal benefits, you must be married for one year or you must be the parent of your spouse’s child. If you wait to collect until your FRA (Full Retirement Age), the maximum spousal benefit is equal to 50% of your spouse’s PIA (Primary Insurance Amount). If you collect a spousal benefit prior to your own FRA, the spousal benefit will be reduced, and this reduction is permanent. There is no increase in a spousal benefit by waiting to collect after your own FRA.”

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4. How To Access Your Personal Earnings Record

“The Social Security Administration has a written record of all your earnings and this record is used to calculate your future benefits,” Shedden said. “You can access your personal earnings record by visiting your Social Security account at ssa.gov. You may also receive a Social Security statement in the mail which will include your earnings history. It is important that you look at the information on your record and make sure the details are accurate.”

5. How Much You Will Get in Social Security Income

“According to the survey, 51% of people don’t have a clear sense of how much they will get in Social Security income,” Shedden said. “Age 62 may be the earliest you can collect Social Security retirement benefits, but it will also result in a permanent reduction of benefits. At age 62, you will only receive 70-75% of your PIA.” 

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6. Divorce May Not Stop You From Getting Benefits From Your Ex

“Divorcees may be eligible to receive benefits based on an ex-spouse’s record,” Shedden said. “One may be eligible to collect ex-spousal benefits if they were married for more than 10 years, are currently single and at least age 62. The same applies, with certain rules, for survivor benefits based on the ex-spouse’s earnings.”

7. Social Security Income Is Taxed

“Social Security income may be taxed on the federal and/or state level,” Shedden said. “A portion of your benefits will be subject to taxation on the federal level if your combined income exceeds a specific threshold. And this threshold varies depending on if you are a single filer or joint filer. There are also 13 states that currently tax Social Security income (in addition to the potential federal tax). Like federal taxation, not all beneficiaries who live in these states will be subject to this taxation. These states have their own rules.”

8. The Best Time To Claim Social Security Benefits

“The best time to claim Social Security benefits is not always age 70,” Shedden said. “Personal circumstances, including but not limited to life expectancy, marital status, work status and other sources of income need to be taken into consideration. Talk to someone who can help you with this such as a Registered Social Security Analyst (RSSA).”

9. Social Security Benefits Are Adjusted for Inflation

“There are changes to the program every year,” said Shedden. “For example, there is a 5.9% Cost of Living Adjustment (COLA) increase in benefits in 2022. With a 5.9% increase, the average beneficiary will expect to receive approximately $100 more each month compared to 2021, making the average monthly Social Security benefit for 2022 $1,657.”

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10. Social Security Benefits Won’t Run Out

“The survey found that many Americans aren’t educating themselves about Social Security because they don’t think it’ll be around when they’re ready or need to claim their benefits,” Shedden said. “Seven in 10 adults ages 25 and older worry that the program will run out of money in their lifetimes. Because of this lack of understanding of how the program works and the subsequent fear of losing out, workers are not engaged in the conversation to strengthen and keep Social Security solvent and retirees are making less than optimal decisions.”

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