10 Key Facts About Social Security Benefits

10 Key Facts About Social Security Benefits 

Things to keep in mind before claiming Social Security

1. Eligibility for Social Security retirement benefits is determined by your work history. To qualify for retirement benefits, you must have earned a minimum number of “credits” over the course of your working life.

2. Changes to your status in any of the following areas can have a positive or negative effect on your retirement benefit amount. Your retirement benefit will be determined on the basis of work experience, your average earnings over 35 years and the age at which you begin taking benefits.

3. The year of your birth and the age at which you start taking Social Security benefits directly affect the amount you receive. If you choose to receive retirement benefits before your Full Retirement Age (FRA*), your benefits will be reduced permanently. For example, if you were born in 1960 or later, your FRA is 67. If you were to start receiving retirement benefits at age

  • 62, your retirement benefit would be permanently reduced by 30%
  • 67, you would receive your full retirement benefit
  • 70, your retirement benefit would increase by 24%                

* Full Retirement Age for retirement and spousal benefits is age 66 for anyone born between 1943 and 1954. It increases by two months for every year from 1955 to 1959. It is age 67 for anyone born 1960 or later.

4. Working while you take Social Security may cause your Social Security benefits to be temporarily withheld. If you are younger than your Full Retirement Age (FRA) and receiving many Social Security benefit, there are limits on how much you can earn without affecting your benefits. When you reach FRA, the earnings limits no longer apply.

5. You may be eligible for spousal benefits if you are at least 62 year of age and your spouse is receiving their retirement or disability benefit. Benefits paid to you as a spouse will not decrease your spouse’s retirement benefit. If there is a divorced spouse who also qualifies for benefits, he or she will not affect the total amount of benefits you or your spouse may receive.

6. Your spousal benefit can be as much as half of your spouse’s benefit at their Full Retirement Age (FRA). In order to receive a spousal benefit, your spouse must be receiving their retirement benefit. If you receive a spousal benefit before you reach FRA, your spousal benefit amount will be reduced and will not increase when you reach FRA. If you are eligible for both your own retirement benefit and a spousal benefit, the Social Security Administration will pay you an amount that equals the higher of the two benefits.

7. If something happens to you, your spouse and minor or disabled children may be eligible for benefits. When you die, your spouse (if he or she is age 60 or older, or any age if he or she is caring for your children younger than 16) may be eligible for survivors benefits. Survivors benefits may be as much as 100% of the deceased’s benefit. Keep in mind that benefits will vary for each person’s situation.

8. Your Social Security benefits may be taxable. If your “combined income” exceeds $32,000 if you file jointly ($25,000 if you file as an individual), you may pay taxes on some of your Social Security benefits. No one pays taxes on more than 85% of their Social Security benefits. Combined income includes adjusted gross income, tax exempt interest and half of your Social Security benefits.

9. Certain kinds of income will not increase the taxability of your Social Security benefits. Preferred asset classes such as qualified Roth IRAs or Roth 401(k) distributions are not included in combined income. Also, for assets that have a cost basis, the cost basis is exempt from the calculation. These assets include the security purchase price (in the case of a taxable investment account), nondeductible IRA contributions and the principal investment portion of an annuity distribution.

10. Your Social Security statement is not a direct representation of what you will receive. The statement is an estimate made on the basis of your most recent earnings and the assumption that you will continue to work and earn about the same amount as you currently earn until you reach Full Retirement Age. The statement does not account for pensions received for work not covered by Social Security, such as certain government or foreign employment. It also does not account for future uncertainties brought about by any changes in your earnings or work status, the law or the date when you start receiving benefits. 

Fast Fact

If you have a security freeze, fraud alert, or both on your credit report please ask your credit reporting agency or the Social Security’s Identity Service Provider to lift your security freeze or fraud alert before accessing your account.  

Source: Social Security Administration

Important Disclosures: 

MFS Fund Distributors, Inc. is not  affiliated with LPL Financial or StrateFi Wealth Management.

This material is provided for general and educational purposes only and is not investment advice. The investments you choose should correspond to your financial needs, goals, and risk tolerance. Please consult a financial advisor or investment professional before making any investment or financial decisions or purchasing any financial, securities or investment related service or product, including any investment product or service described in these materials.

All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.