10 Common Questions About Social Security

Social Security is one of the largest and most popular government programs in history, but it's also one of the most confusing. According to a University of Michigan study, 22% of current retirees said they regretted taking their benefits when they did and 21.4% underestimated the amount they would receive from Social Security.

Determining how Social Security fits into your overall plan of saving for retirement can cause some headaches. If you don’t understand the rules, you could even lose money. We’ll answer the most common questions about Social Security to help you sort through the confusion.  

You can apply for Social Security by going to SSA.gov and filling out an application, or by calling your local Social Security office. Currently, office visits are by appointment only due to COVID-19 and are generally reserved for critical situations.

Full Social Security benefits start when you reach full retirement age (FRA) which is determined based on the year you were born. For instance, if you were born in 1955, your FRA is 66 and two months. The FRA increases in two-month increments until reaching age 67 for people born in 1960 or later.

If you’re interested in an early retirement, you can start collecting Social Security anytime after age 62, but the amount you receive will be reduced by a small percentage until you reach your FRA. Conversely, if you wait to start collecting Social Security until you turn 70, your benefit amount will increase. There is no benefit increase if you wait to collect after age 70, however.

Credits are how you qualify for Social Security benefits. You must earn at least 40 credits throughout your working life, and you can earn no more than four credits in a year. The amount you need to earn to get one credit goes up slightly each year. For example, in 2022, every $1,510 in wages or self-employed earnings will get you one credit. That means you’ll need to make $6,040 in one year to receive your four credits.

Your Social Security benefits will not increase if you earn more than 40 credits since benefits are calculated based on the average of the 35 years you made the most, not on how many credits you acquired over your career.

The best way to ensure you get the highest benefit is to wait to start collecting Social Security until your FRA, which is 67 for people born in 1960 or later. If you claim Social Security at age 62, your benefit will be reduced by 30% compared to what you would receive at FRA. Once you reach FRA, you’ll receive 100% of your benefit amount.

If you delay claiming your benefits until age 70, you’ll increase your benefit by about 8% per year until you reach age 70. However, delaying past age 70 wont increase your benefit any further.

You may have to pay taxes on your Social Security Benefits, based on your combined income, which is calculated as your adjusted gross income + nontaxable interest + one-half of your Social Security benefits = combined income.

For example, if you’re single and your combined income is less than $25,000 a year including half of your Social Security benefits — or $32,000 if married filing jointly — you may not have to pay taxes on your benefits.

If your combined income is between $25,000 and $34,000 a year as an individual or $32,000 and $44,000 as a couple, you may owe taxes on 50% of your benefits. With a combined income above $34,000 (or $44,000 for a couple), 85% of your Social Security benefits may be taxed.

This online calculator can help you estimate how much of your benefit may be taxable.

The maximum benefit payable in 2022 is $3,345 per month if you are at your FRA when you claim your benefits. It’s important to remember that your Social Security payment is adjusted up or down based on how far you are from FRA when you start to claim benefits.

If you claim Social Security in 2022 at the age of 62, your maximum monthly benefit will be $2,364. But if you’ve delayed your benefits until you’re 70 years old, the maximum benefit in 2022 will be $4,194 a month due to delayed benefit credits.

As you work out how to invest money for retirement, remember that waiting to collect Social Security until at least your FRA, if not until age 70, is usually the most advantageous, but work with a retirement professional to help you determine what’s best for you.

Yes, you can. But as you think about how to earn money in retirement, make sure you pay attention to the annual earnings test. This rule says that if you reach your FRA after 2022 but are collecting Social Security benefits and still working, your earnings limit is $19,650 per year. Anything you earn over $19,650 will reduce your benefits by $1 for every $2 earned.

If you reach your FRA in 2022, your annual earnings limit is $51,960 and only applies to what you earn in the months prior to reaching your FRA.

These numbers apply to earned income only, like wages or income from a retirement side hustle and not to withdrawals you take from retirement accounts or pensions received. Once you reach your FRA, you can work as much as you’d like, and your earnings will not be subject to the annual earnings test.

Social Security pays a one-time, lump-sum death benefit of $255 to a surviving spouse or child if they meet certain requirements.

In addition to the one-time death benefit, a spouse, and sometimes other family members, may also be entitled to monthly survivors benefits. In most cases, you can apply for survivors benefits after the death of a spouse if you are age 60 or older and have been married for at least nine months, although there are some exceptions.

The funeral home handling the arrangements generally reports a person’s death to the Social Security Administration (SSA). You can also report the death of a loved one directly by calling your local Social Security office. SSA.GOV instructs people to notify them immediately of a person’s death.

To apply for either the one-time $255 death benefit or ongoing survivors benefits you will have to fill out various forms and provide original documentation or certified copies.

Social Security and Supplemental Security Income (SSI) are not the same. Social Security provides benefits based on credits and earnings and is funded from two trusts — the Old-Age and Survivors Insurance (OASI) Trust Fund and the Disability Insurance (DI)Trust Fund.

SSI is a needs-based program based on a person’s limited income and resources. SSI is paid for by general tax revenue — not the Social Security Trusts — and benefit amounts are based on Federal and State laws. In some states, people receiving SSI may also be eligible for Medicaid and food assistance.

While it is possible to receive both Social Security and SSI benefits, make sure you’re working with your local SSA office to help you understand your eligibility and the requirements for your specific situation under each program.

Social Security is an integral part of the financial puzzle for many retirees, keeping three in 10 older Americans above the poverty line. However, it shouldn’t be your only source of income in retirement. Understanding the program can help you maximize your benefits, along with using your retirement savings effectively. Make sure you know how much to save for retirement while you’re still working so that you can spend your golden years living life to the fullest.