What You Really Should Know About Social Security Benefits

By:  Maureen Wilkin, Federal Benefits Specialist

Published:  June 20, 2018

Most people working today tend to think of Social Security benefits as something to consider when they get old.  Human nature being what it is they put off thinking about those benefits.  And that’s not a good idea.  Social Security benefits are not a component of old age.  In fact, as a working individual, you might qualify for some type of benefit long before you reach old age.  Benefits are available to workers at retirement age, if they become disabled, and then to surviving family members at the time of the worker’s death.  If you are married to a worker receiving a benefit, you might qualify for a spousal benefit, even if you do not qualify for a worker’s benefit of your own. 

All of this sounds complicated, but it really is not. Let’s simplify some basic facts you should know about Social Security retirement benefits.
Benefit Eligibility
worker’s benefit is based on your employment history. You must have at least 40 credits. Credits are earned by paying taxes on your earnings, up to a maximum in each year. In 2018, you get one credit for each $1,320 of earnings and you can only earn four credits in any year. 
spousal benefit is based on your spouse’s employment history. There are two types of spousal benefits: current spouse and former spouse. To receive a current spouse benefit, you must be 62 or older AND your spouse must be receiving a benefit. For a former spouse benefit, you must be 62 or older and NOT married, but were married at least ten years to a former spouse who is either eligible for OR receiving a benefit.
NOTE: If you qualify for both a worker’s benefit and a spousal benefit, you will receive the higher of the two benefits. 
 
Age requirements for a worker’s benefit
The minimum age to apply is 62, but your benefit will be reduced because you are not full retirement age (FRA) in the world of Social Security. If you wait until FRA you will receive your full benefit. Your FRA is based on the year on which you were born. It is 66 if you were born 1943-1954 and 67 if you were born after 1960. If you wait to apply for your benefit until age 70, or any point between your FRA and 70, you will receive an annual increase in benefit known as delayed credits. 
When to start receiving Social Security
This gets personal because there are many factors involved in making this decision. There is no one-size-fits-all and that can make it challenging. You must consider your age, your working status and your income needs. One of the more important factors to consider is life expectancy. As much as you’d like to avoid the topic, it is a key factor in deciding when to apply! If you are married and your spouse will also qualify for a worker’s benefit, this decision becomes twice as challenging.
Benefit Calculation
worker’s benefit is based on the 35 highest years of earnings in your total work history. That’s those earnings reported through employers that are reflected on your annual Social Security statement you can view online atwww.ssa.gov. It is possible for a benefit to be recalculated to reflect a year of higher earnings, even if you are already receiving a benefit. 
spousal benefit is based on the full retirement benefit of the worker. It can be 50% if claimed at the spouse’s FRA. It will be reduced if the spouse claims before their FRA.     
Things to know about receiving a benefit
If you work while receiving a benefit, your benefit can be reduced if you exceed the earnings limit for the year. The reduction is based on your age and how much you exceed the annual limit. Spousal benefits can be reduced if the worker benefit is reduced for excess earnings.
Social Security benefits are taxable. At the federal level the tax depends upon your income and filing status. Some states also tax Social Security benefits, depending upon a variety of factors.
Receiving a Social Security benefit might impact your Medicare Part B premium. That premium is based on your modified adjusted gross income (AGI) from a previous year’s federal tax return. There are income thresholds that determine the various levels of premium costs. Know that if you are married and file federal taxes jointly, the modified AGI is not divided by two in the Medicare Part B premium calculation.  
Looking ahead
While the long range future of Social Security is beyond the control of the working population, you can and should stay aware of your personal situation related to earning a benefit and what the benefit might be. Review your annual statement of benefits and sign up for a mySSA account online at www.ssa.gov. You can also get information about program updates and news by signing up for the SSA electronic newsletter on the website.
Remember, the best time to prepare for the future is the present. The facts in this newsletter will provide a good starting point for your plan.

Maureen Wilkin is a retired Federal employee who was a benefits specialist for 38 years and involved with Federal employee training for over 20 years. Now, she is a seminar and webinar presenter for NITP.