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Social Security: 5 Key Questions

1. What Is It? 

Social Security is a federal retirement fund that you pay into through your paycheck. The program also provides payments to those on disability and survivors benefits to the spouses and children of covered workers who have died. 

2. How Do I Qualify for Payments?  

The retirement system is based on the amount of credits that you earn as you work. In the simplest terms, if you have worked a total of at least 10 years in a job where Social Security payments were deducted from your paycheck, you are eligible to receive benefits.  

3. How Much Will My Benefit Be?  

For your own retirement benefit, that depends on how many credits you have earned and when you retire. The average monthly benefit in 2017 was $1,342.  

4. When Can I Begin to Receive Benefits?  

You can begin taking benefits as early as age 62. When you start will have a significant impact on how much you get each month, so timing is an important consideration. Here’s how it works: 

  • You will receive the full benefits that you’re eligible for if you begin taking Social Security at full retirement age. When is that? Somewhere between 65 and 67, depending on the year you were born.   
  • Your benefits will be permanently reduced if you start taking them before full retirement age. Depending on your full retirement age, the reduction ranges from 25% to 30% of what you would have received if you waited until full retirement age to begin. 
  • If you delay taking payments until age 70, your payments will increase by 8% for every year you defer if you were born after 1943.  

Factors to consider in deciding when to begin can include: 

  • Your current cash needs.  
  • Your other expected retirement income. 
  • Your health and family longevity.  
  • Your current and future financial obligations. 
  • Your post-retirement plans.  

5. What If I Work While Receiving Benefits? 

One advantage of continuing to work is that it could increase the benefit you receive if your income goes up. In your planning, remember as well that you could be taxed on your benefits if your combined income is higher than $25,000 (or $32,000 combined income for married couples filing jointly). Your combined income is your adjusted gross income, any tax-exempt interest you earn and one-half of your Social Security benefits. You can only be taxed on the first 85% of your Social Security benefits.