Social Security 101: What You Should Know About Your Benefits

November 30, 2018

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Social Security can be pretty complex, and even basic questions can feel overwhelming. We wrote this article to help answer some of the most common questions about the program. Please feel free to share it with any family or friends who may be wondering about the what and the when of their benefits.

  1. Why Is Social Security Important?
    Social Security will likely be one of your most important sources for retirement income. Unlike your investment portfolio, you can’t outlast your benefits. The Social Security Administration will pay your benefits as long as you live.

    What’s more, if you are one-half of a married couple, the surviving spouse can opt for the other’s benefit if it turns out to be more than the amount they were receiving.

    Finally, Social Security is annually reviewed to determine whether the amounts paid to recipients need to be adjusted upward for inflation. That’s just something your investment account won’t do.
  1. How Old Do I Have to Be to Collect Social Security?
    An important term you should be aware of is full retirement age, often shortened to FRA. FRA is the age at which you can collect your full Social Security benefits. That age will be between 65 and 67 depending on the year you were born. You can review a chart to determine your FRA by clicking here.   

    You can collect benefits before reaching your full retirement age, and though “the sooner, the better” perspective has appeal, there’s a downside. Your monthly benefit amount will be reduced for the rest of your life. The earliest you can collect benefits is at age 62, but the amount will be reduced by a whopping 30% of your FRA amount.

    On the other hand, you can delay past FRA and see an increase in your benefits for each year you postpone up to age 70.
  1. Can I Keep Working If I Collect Benefits?
    Yes, you can keep working, but you need to know about the “earnings test.” Essentially, the earnings test means that the Social Security Administration will reduce your benefits if your income exceeds a certain threshold:
  • Under FRA for the entire year you work and collect benefits: $1 will be deducted from your benefit payments for every $2 you earn above the limit. For 2019, the limit is $17,640.

  • Reaching FRA in the year you work and collect benefits: $1 will be deducted for every $3 you earn above the annual limit, with the 2019 limit being $46,920. Once you reach FRA, there will be no more deductions.

It’s important to note that the deducted money isn’t gone forever. Once you reach full retirement age, the Social Security Administration will return the money to you in the form of an increased benefit.

Conclusion

Social Security is complex, and this article touched on only the basics. However, by understanding Social Security’s importance, age requirements, and work rules, you can start making more informed decisions about your retirement. If you want more personalized advice, we encourage you to reach out to us.

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