Social Security benefits can be a vital source of income for retirees, but there are also some misconceptions about the program. In this article, we’ll dispel some of those myths and give you the facts about Social Security.
You’ve been paying into Social Security since you started working, and you know it will be there for you when you retire. But there are a few things about the program that you may not know. In this article, we’ll share 7 things every worker should know about Social Security benefits.
- Social Security is more than just a retirement program.
- You can start receiving benefits as early as age 62.
- The amount of your benefit is based on your earnings history.
- You may be able to increase your benefit by delaying retirement.
- There are special rules for government employees and military personnel.
- Social Security benefits are taxable under certain circumstances.
- You can receive benefits if you become disabled before retirement age.
What are Social Security Benefits?
Social Security benefits are payments that are made to eligible individuals by the Social Security Administration (SSA). These payments are made to individuals who are retired, disabled, or have worked for a certain period of time.
The amount of Social Security benefits that an individual receives is based on their earnings history. The SSA looks at an individual’s earnings over their working life and uses this information to calculate their benefit amount.
Benefits can be received beginning at age 62 for retirement, or at any age if the individual is disabled. However, the full retirement age is currently 66 years old. If an individual waits until after their full retirement age to begin receiving benefits, they will receive a higher benefit amount.
Individuals can start receiving benefits as early as age 62, but the number of benefits they receive will be lower than if they wait until their full retirement age.
How You Become Eligible for Social Security Benefits
There are two ways to become eligible for Social Security benefits. The first way is by working and paying into the Social Security system through your payroll taxes. The second way is by being married to someone who is already receiving Social Security benefits.
If you become eligible for Social Security benefits through your own work history, you will need to have worked for at least 10 years. If you become eligible through your spouse’s work history, you will need to have been married for at least 10 years.
Once you become eligible for Social Security benefits, you will receive them for the rest of your life. You do not need to re-apply for benefits every year. However, you will need to report any changes in your income or marital status to the Social Security Administration so that your benefits can be adjusted accordingly.
How Much You Can Expect to Receive in Social Security Benefits
The amount of Social Security benefits you can expect to receive will depend on your work history and earnings. The Social Security Administration (SSA) uses a formula to calculate your benefits.
Your benefits will be based on your highest 35 years of earnings. If you have less than 35 years of earnings, the SSA will use zeros for the missing years. Your benefits will also be adjusted for inflation.
The SSA estimates that the average monthly Social Security benefit for retired workers is $1,360 in 2020. However, your actual benefit amount may be higher or lower than this amount.
If you have any questions about your expected Social Security benefit amount, you can contact the SSA directly.
Your Social Security Benefits Are Not Taxed
One of the biggest advantages of Social Security benefits is that they are not taxed. This means that you can receive your full benefit amount without having to pay any federal income taxes on it.
Some states do tax Social Security benefits, but most do not. You can check with your state’s tax agency to see if your benefits are subject to state taxes.
When Should You Start Receiving Social Security Benefits?
You can start receiving Social Security benefits as early as age 62 or as late as age 70. The earlier you start receiving benefits, the lower your monthly benefit amount will be.
The SSA estimates that someone who starts receiving benefits at age 62 will receive about 75% of their full benefit amount. Someone who starts receiving benefits at age 70 will receive about 132% of their full benefit amount.
There is no “right” answer when it comes to when you should start receiving your Social Security benefits. It depends on your personal circumstances and financial goals. You may want to speak with a financial advisor to help you make this decision.
When You Should Start Receiving Social Security Benefits
The best time to start receiving social security benefits is at age 70. By waiting until age 70, you will receive the highest possible benefit amount. If you start receiving benefits before age 70, your benefit amount will be reduced.
You should also keep in mind that you need to have enough work credits to qualify for social security benefits. You need to have worked for at least 10 years to qualify. If you have not worked for at least 10 years, you will not be eligible to receive benefits.
If you are still working, you should know that you can continue to earn work credits even if you are already receiving social security benefits. So, if you are not yet ready to retire, there is no need to rush into starting your social security benefits. You can wait until later on to start receiving them.
How Social Security Benefits are Taxed
There are a few things you should know about how Social Security benefits are taxed.
First, if you have other sources of income, your Social Security benefits may be taxable. This includes things like pensions, annuities, and investment income. The amount of tax you owe on your benefits depends on your total income and filing status.
Second, if you are married and file a joint tax return with your spouse, only half of your combined Social Security benefits may be taxable. This is called the “50% rule.”
Third, if you are divorced and receiving benefits based on your ex-spouse’s work history, those benefits may be taxable. The amount of tax you owe depends on your total income and filing status.
Overall, it’s important to be aware of how your Social Security benefits will be taxed. If you have other sources of income, or if you are married or divorced, you may owe taxes on some or all of your benefits.
Conclusion
It’s important to understand how Social Security benefits work so that you can make the most of them when you retire. We hope this article has given you a better understanding of the basics and shown you some things that you may not have known about before. If you have any more questions, be sure to consult with a financial advisor who can help you figure out the best way to maximize your benefits.
There’s a lot to know about Social Security benefits, but the seven things we’ve covered in this article are some of the most important. If you’re counting on Social Security to help support you in retirement, it’s crucial that you understand how the program works and what your options are. We hope this article has given you a better understanding of Social Security benefits and how you can make the most of them.
