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Social Security provides the foundation for retiree financial independence.

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Introduction

This section will tell you what you need to know about Social Security and how it effects you during the several years leading up to retirement and after you retire. It will answer the following questions:

  • How do I get my Social Security (SS) earnings statement?
  • How do I set up an online SS account?
  • Is everyone entitled to receive SS?
  • How much Social Security income will I receive?
  • What's the maximum and minimum amount of SS income that I can receive?
  • What if I take early retirement or delay retirement past my full retirement age?
  • What cost of living increases can I expect to receive?
  • What SS deductions will I have?
  • Can I work and still receive SS income?
  • What part of my SS payments will my spouse receive if I die?

Social Security Earnings Statement

There are two ways to receive a record of your Social Security earnings history:

  1. Complete form #0960-0466 and mail it to the address shown on the form, or
  2. Use the Social Security Administration’s website to request an online statement.

If you complete and mail the form, within four to six weeks you will receive a statement containing your earnings history and other important Social Security information.  If you request a Statement online, it will be instantly available.

Note that if you have been receiving a Social Security Statement each year about three months before your birthday, this request will stop your next scheduled mailing.  You will not receive a scheduled Statement until the following year.

Your Social Security Statement consists of 6 major sections titled:

  1. What Social Security Means to You
  2. Your Estimated Benefits
  3. How Your Benefits are Estimated
  4. Your Earnings Record
  5. Help Us Keep Your Earnings Record Accurate
  6. Some Facts About Social Security

The Statement provides:

  • Estimates of the retirement and disability benefits you may receive,
  • Estimates of benefits your family may get when you receive Social Security or die,
  • A list of your lifetime earnings according to Social Security’s records,
  • The estimated Social Security and Medicare taxes you’ve paid,
  • Information about qualifying and signing up for Medicare,
  • Things to consider for those age 55 and older who are thinking of retiring, and
  • General information about Social Security.

Click here to download a sample Statement

The content of your Statement will vary depending upon whether you've already filed a Claim for Benefits.  If you've already filed a claim, you will receive a separate "Your Benefits Amount" statement each new year showing the exact amounts of your:
  • Monthly benefit for the next year,
  • Medicare medical insurance deduction,
  • Medicare prescription plan deduction, and
  • Voluntary Federal tax withholding.

You can also request and receive a Statement online.  To get your Statement online, you must first create a Social Security account.  Once you have an account, you can view, download and print your Social Security Statement at any time.

Online Social Security Account

You can create a Social Security online account at www.socialsecurity.gov or www.ssa.gov.  To obtain access you must provide some personal information about yourself and answer questions that only you are likely to know the answers to.  Finally, you need to create a username and password for future access to your account information.

Who Receives Social Security Benefits?

In general anyone who has paid Social Security taxes or is the spouse of someone who has paid Social Security taxes receives benefits when they retire.

When Congress passed the Social Security Act in 1935, it excluded federal, state, and local government employees from mandatory coverage. In the early 1950s, Congress passed a law that allowed state and local government employees to be covered if they voluntarily chose coverage in a referendum.

Up until 1984, workers for the federal government were covered under the Civil Service Retirement System (CSRS), did not pay Social Security tax on earnings, and were not covered by Social Security.

But in 1984, a second retirement system, the Federal Employees Retirement System (FERS), was introduced. Federal workers hired under FERS are covered by Social Security because they pay Social Security taxes. Also, some workers covered by CSRS chose to switch to FERS.

Social Security Benefit Calculations

Social Security benefits replace a percentage of your earnings when you retire, become disabled or die.  Your benefit payment is based on how much you earned during your working career.  Higher lifetime earnings result in higher benefits.  If there were some years when you did not work or had low earnings, your benefit amount may be lower than if you worked steadily.

As described above, your online Social Security statement will provide you with estimates of benefits you may get when you retire.  Another way to estimate benefits is to use the Retirement Income Estimator on the Social Security website: www.socialsecurity.gov.

The Retirement Income Estimator gives estimates based on your actual Social Security earnings record.  Actual benefit amounts are not available until you apply for benefits, and that amount may differ from the estimates provided because:

  • Your earnings may increase or decrease in the future.
  • After you start receiving benefits, they will be adjusted for cost-of-living increases.
  • Your estimated benefits are based on current law.  The law governing benefit amounts may change because, by 2033, the payroll taxes collected will be enough to pay only about 75 cents for each dollar of scheduled benefits.
  • Your benefit amount may be affected by military service, railroad employment or pensions earned through work on which you did not pay Social Security tax.

Maximum Social Security Benefit

The maximum benefit depends on the age a worker chooses to retire. For example, for a worker retiring at full retirement age in 2017, the amount is $2,687 per month. This figure is based on earnings at the maximum taxable amount for every year after age 21 (see below).

Maximum Taxable Earnings Each Year

 

Years

Earnings

 

 

Years

Earnings

 

 

Years

Earnings

1937 - 50

$3,000

 

 

1984

$37,800

 

 

2002

$84,900

1951 - 54

3,600

 

 

1985

39,600

 

 

2003

87,000

1955 - 58

4,200

 

 

1986

42,000

 

 

2004

87,900

1959 - 65

4,800

 

 

1987

43,800

 

 

2005

90,000

1966 - 67

6,600

 

 

1988

45,000

 

 

2006

94,200

1968 - 71

7,800

 

 

1989

48,000

 

 

2007

97,500

1972

9,000

 

 

1990

51,300

 

 

2008

102,000

1973

10,800

 

 

1991

53,400

 

 

2009

106,800

1974

13,200

 

 

1992

55,500

 

 

2010

106,800

1975

14,100

 

 

1993

57,600

 

 

2011

106,800

1976

15,300

 

 

1994

60,600

 

 

2012

110,100

1977

16,500

 

 

1995

61,200

 

 

2013

113,700

1978

17,700

 

 

1996

62,700

 

 

2014

117,000

1979

22,900

 

 

1997

65,400

 

 

2015

118,500

1980

25,900

 

 

1998

68,400

 

 

2016

118,500

1981

29,700

 

 

1999

72,600

 

 

2017

127,200

1982

32,400

 

 

2000

76,200

    

1983

35,700

 

 

2001

80,400

    

There is no minimum monthly Social Security benefit amount.  For administrative reasons, they will not pay a benefit of less than $1.

Full Retirement Age

Choosing when to retire is one of the most important decisions you will make in your lifetime.  If you choose to retire, and begin receiving social security benefits, when you reach your full retirement age, you will receive your full benefit amount.  If you were born in 1951, you will have reached your full retirement age this year (2017).

The following chart lists the full retirement age by year of birth:

Year of Birth
Full Retirement Age
1943-1954
66
1955
66 and 2 months
1956
66 and 4 months
1957
66 and 6 months
1958
66 and 8 months
1959
66 and 10 months
1960 or later
67

If you were born on January 1st of any year you should refer to the previous year.  If you were born on the 1st of the month, your benefit (and your full retirement age) is figured as if your birthday was in the previous month.

Early Retirement

You may start receiving benefits as early as age 62.  However, if you start your benefits early (before your full retirement age shown above), your benefit amount is reduced.  Your benefit is reduced about one-half of 1 percent for each month you start your Social Security before your full retirement age.  For example, if your full retirement age is 66 and you sign up for Social Security when you are 62, you would only get 75 percent of your full benefit.  Note that the reduction will be greater in future years as the full retirement age increases.

Here's the percent of your full retirement benefit that you'll receive for various retirement years if your Full Retirement Age (FRA) is 66 or 67:

SS Benefit Impact of Early Retirement
Apply at Age
If FRA = 66
If FRA = 67
62

75.0%

70.0%

63

80.0%

75.0%

64

86.7%

80.0%

65

93.3%

86.7%

66

100%

93.3%

67

 

100%


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Spousal Benefit

Your spouse will receive their social security benefit based on either the amount calculated from their earnings or a percent of your social security benefit, whichever is greater.  If based on your earnings, your spouse’s benefits are determined by what your benefit would be at full retirement age.  (As a maximum your spouse's benefit could be 50% of your full retirement age benefit).  If your spouse starts receiving benefits earlier than your full retirement age (66 or 67 in this example), her/his benefits are the following percent of your full retirement benefit:

Spousal Benefit Percentage
Spouse
Applies at Age
If Your
FRA = 66
If Your
FRA = 67
62

35.0%

32.5%

63

37.5%

35.0%

64

41.7%

37.5%

65

45.8%

41.7%

66

50.0%

45.8%

67

 

50%

Several rules need to be considered in filing for spousal benefits:
  • The primary worker must have filed for benefits (but can suspend benefits to build delayed credits if over full retirement age and less than 70 years old).
  • The spouse must be at least 62 for reduced benefit or 66 for full benefit.
  • A spouse cannot delay receiving benefits past their full retirement age and earn delayed retirement credits.

There are additional rules for divorcees which can be found on the social security website.

Delayed Retirement

If you choose to delay receiving benefits beyond your full retirement age, your benefit will be increased by a certain percentage, depending on the year you were born.  The increase will be added in automatically each month from the time you reach full retirement age until you start taking benefits or reach age 70, whichever comes first.  The following table shows the percentage of your full retirement age (66 or 67) benefit that you'll receive based on the age you begin receiving benefits:

Impact of Delaying Retirement
Apply at Age
If FRA = 66
If FRA = 67
66

100%

 

67

108%

100%

68

116%

108%

69

124%

116%

70

132%

124%

Determining When to Begin Receiving Benefits

As previously presented, you can begin receiving Social Security benefits anytime between the year you turn 62 and the year you turn 70.  There are many factors to consider in deciding when, within this 8-year period, to begin receiving your Social Security benefits.  Among them are:
  • Your health and how long you expect to live.
  • How dependent you are on your Social Security income.
  • What you plan to do with your benefits if you begin receiving them early.
  • Whether you plan to work after retiring from your regular, primary job.

The table below shows the effect of receiving early (less than full retirement age) Social Security benefits.  In this example full retirement age is 66 and the maximum Social Security benefit a 62 year old worker would receive today if he was already 66 is $2,687/month.  (This example assumes that the $2,687 monthly SS payment will grow by 2.0% a year to $2,908.50 by the time the worker reaches full retirement age.)

At age 62 the worker will receive 75% of his full retirement age benefit ($2,015.25).  The example calculates the cumulative affect of receiving benefits early assuming 2.0% annual cost-of-living adjustments.

 

Age

Full Retirement Benefit

Cumulative Amount

 

Early Retirement Benefit

Cumulative Amount

62

 

 

 

$2,015.25

$24,183.00

63

 

 

 

$2,055.56

$48,849.66

64

 

 

 

$2,096.67

$74,009.65

65

 

 

 

$2,138.60

$99,672.85

66

$2,908.50

$34,901.94

 

$2,181.37

$125,849.30

67

$2,966.67

$70,501.92

 

$2,225.00

$152,549.29

68

$3,026.00

$106,813.91

 

$2,269.50

$179,783.28

69

$3,086.52

$143,852.13

 

$2,314.89

$207,561.94

70

$3,148.25

$181,631.11

 

$2,361.19

$235,896.18

71

$3,211.21

$220,165.68

 

$2,408.41

$264,797.10

72

$3,275.44

$259,470.93

 

$2,456.58

$294,276.04

73

$3,340.95

$299,562.29

 

$2,505.71

$324,344.57

74

$3,407.77

$340,455.48

 

$2,555.82

$355,014.46

75

$3,475.92

$382,166.53

 

$2,606.94

$386,297.75

76

$3,545.44

$424,711.81

 

$2,659.08

$418,206.70

77

$3,616.35

$468,107.99

 

$2,712.26

$450,753.84

78

$3,688.68

$512,372.09

 

$2,766.51

$483,951.91

79

$3,762.45

$557,521.47

 

$2,821.84

$517,813.95

80

$3,837.70

$603,573.84

 

$2,878.27

$552,353.23

In this example the person who waited to receive social security benefits until they reached full retirement age (66) will be ahead in cumulative benefits (by $6,505.11) at age 76.  At age 80 this person will be receiving $11,513 a year extra and will have received a cumulative benefit of nearly $51,221 more.

Finally, you need to consider that the person who began receiving Social Security benefits at age 62 accumulated $99,672.85 before the full-retirement-age person received any money.  These "early" dollars are worth more due to inflation.  If they are invested at 5% for these first four years, they would yield an additional $10,278 in interest.

Cost of Living Increases

The U.S. Social Security system is funded by investment in special U.S. Treasury Bonds.

Automatic benefit increases, also known as cost-of-living adjustments or COLAs, have been in effect since 1975.  The 1975-82 COLAs were effective with June’s Social Security benefits payment.  After 1982, COLAs have been effective with December’s benefits payment (received in January).

COLAs received in 1975-2017 are shown below.

 

Automatic Cost-Of-Living Adjustments 

July 1975 -- 8.0%

 

January 1997 -- 2.9%

July 1976 -- 6.4%

January 1998 -- 2.1%

July 1977 -- 5.9%

January 1999 -- 1.3%

July 1978 -- 6.5%

January 2000 -- 2.5%

July 1979 -- 9.9%

January 2001 -- 3.5%

July 1980 -- 14.3%

January 2002 -- 2.6%

July 1981 -- 11.2%

January 2003 -- 1.4%

July 1982 -- 7.4%

January 2004 -- 2.1%

January 1984 -- 3.5%

January 2005 -- 2.7%

January 1985 -- 3.5%

January 2006 -- 4.1%

January 1986 -- 3.1%

January 2007 -- 3.3%

January 1987 -- 1.3%

January 2008 -- 2.3%

January 1988 -- 4.2%

January 2009 -- 5.8%

January 1989 -- 4.0%

January 2010 -- 0.0%

January 1990 -- 4.7%

January 2011 -- 0.0%

January 1991 -- 5.4%

January 2012 -- 3.6%

January 1992 -- 3.7%

January 2013 -- 1.7%

January 1993 -- 3.0%

January 2014 -- 1.5%

January 1994 -- 2.6%

January 2015 -- 1.7% 

January 1995 -- 2.8%

January 2016 -- 0.0%

January 1996 -- 2.6%

 

January 2017 -- 0.3%

Social Security Benefit Payments

As shown in the cumulative benefit columns of the above table, Social Security provides very generous benefits to those who have contributed (via payroll deductions) to the Old Age, Survivors and Disability Insurance (OASDI) Trust Fund.  If you are a recent retiree and live to age 80, you will receive over half a million dollars in benefits.  This will be over twice what you have contributed to the OASDI fund while working.

Social Security payments are made on Wednesdays based on the day of the month on which you were born:

Birth Day of Month

Benefits Paid On:

1 - 10

1st Wednesday

11 - 20

2nd Wednesday

21 - 31

3rd Wednesday

Social Security Deductions

Although you are not required to have federal taxes withheld from your Social Security benefits, you may find that easier than paying quarterly estimated tax payments.  To have federal taxes withheld, or to change your original withholding request, you will need to:
  • Complete IRS Form W-4V,
  • Select the percentage (7, 10, 15, or 25 percent) of your monthly benefit amount you want withheld, and
  • Sign and return the form to your local Social Security office  by mail or in person

You may obtain IRS Form W-4V from the IRS Website at http://www.irs.gov/pub/irs-pdf/fw4v.pdf  or by calling the IRS toll-free number, 1-800-829-3676.

Social Security automatically deducts your monthly cost for Medicare and your Medicare Prescription Drug Plan (if any).  However, it is not authorized to withhold state taxes, if any, from your benefit payment.

Can You Work and Get Benefits?

If you've already begun receiving Social Security retirement benefits, you can continue to work and still receive benefits.  Working while receiving benefits will only reduce benefits in the years worked and will not reduce future benefits.  Your earnings in (or after) the month you reach full retirement age will not reduce your Social Security benefits.  In fact, working beyond full retirement age can increase your benefits.  However, your benefits will be reduced if your earnings exceed certain limits for the months before you reach your full retirement age.

If you work but start receiving benefits before full retirement age, $1 in benefits will be deducted for each $2 in earnings you have above the annual limit.  In 2017, the limit is $16,920.

In the year you reach your full retirement age, your benefits will be reduced $1 for every $3 you earn over a different annual limit ($44,880 in 2017) until the month you reach full retirement age. But, only the earnings before the month you reach full retirement age are counted.

Once you reach full retirement age, you can keep working, and your Social Security benefit will not be reduced no matter how much you earn.

Surviving Spouse Benefits

If you are getting benefits as a wife or husband based on your spouse’s work, when you report the death to Social Security, they will change your payments to survivor’s benefits.

If you are getting benefits based on your own work, call or visit Social Security, and they will check to see if you can get more money as a widow or widower.  If so, you will receive a combination of benefits that equals the higher amount.  You will need to complete an application to switch to survivors benefits, and will need to show your spouse’s death certificate.

The benefit amount is based on the earnings of the person who died. The more the worker paid into Social Security, the greater your benefits will be.

Social Security uses the deceased worker's basic benefit amount and calculates what percentage survivors are entitled to. The percentage depends on the survivors' ages and relationship to the worker. If the person who died was receiving reduced benefits, your survivor's benefit is based on that amount. A widow or widower, at full retirement age or older, generally receives 100 percent of the worker's basic benefit amount.