When you think of Social Security, a number of thoughts may pop up in your mind — some good and some bad. While it is not without flaws, Social Security is the biggest social program in America, and it is because of it that many seniors can pay their monthly bills. 



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7 Social Security Facts Every Retiree Must Know

Since its inception, millions of people receive Social Security every year and at some point in time, you will be one of them. Here are seven things about the benefits that you should know before starting them. 



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Mature man sitting in a hammock with a tropical drink in his hand.

1. You have to qualify

You don’t automatically receive Social Security benefits; you must qualify for them. You become eligible by earning 40 work credits in total between age 21 and the year in which you turn 62. For the year 2021 you get a credit for every $1,470 that you make and you can receive up to four credits each year.

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This means that if you’re consistently employed in your adult years, you will qualify after 10 years of working. There are also some special circumstances, like if you have a disability that will allow you to claim Social Security benefits earlier or with fewer credits. 

2. How much you get depends on when you take it.

You’re eligible for Social Security at different ages, but when you take your benefits will determine how much of a monthly benefit you get. If you take it at the youngest allowable age (62), you’ll receive the lowest amount. For each year that you delay taking Social Security past your full retirement age, you get an extra 8{3eba3d3415becf4302d80c682b6480d7b88003de9407d8cc6f062607002b4a18} in income. This increase goes up to age 70, the maximum age you can delay your benefits. 

At what age should you start taking your benefits? Everyone’s situation is different but some factors that you should consider are your needs for income and your life expectancy. If you don’t need the money, you may benefit from delaying Social Security and receiving a higher benefit later. If you have a family history of living a long time, it may work out best that you start taking your income later in life. If, however, you have a family history with a shorter lifespan, you may benefit more from taking Social Security earlier.

3. You’re taxed

If you thought you’d get to say goodbye to taxes in retirement, there’s a possibility that you’re not completely done. Your tax structure will change, giving you somewhat of a break, but Uncle Sam will still want his cut. How much is based on your income in retirement.

If you’re an individual with total income (including other sources beyond Social Security) between $25,000 and $34,000 or a joint filer with a combined income between $32,000 and $44,000, 50{3eba3d3415becf4302d80c682b6480d7b88003de9407d8cc6f062607002b4a18} of your Social Security benefits will be taxed. That percentage increases to 85{3eba3d3415becf4302d80c682b6480d7b88003de9407d8cc6f062607002b4a18} if you earn over $34,000 for individuals and $44,000 for joint filers. 

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4. There is a cost of living adjustment

It is a certainty that as you age, the goods and services that you buy will get more expensive. Your Social Security benefits will include a cost of living adjustment (COLA) that will help you keep up with this increase in costs. The COLA changes each year but for anyone who receives Social Security benefits in 2021, that number is 1.3{3eba3d3415becf4302d80c682b6480d7b88003de9407d8cc6f062607002b4a18}.

Annual inflation is currently calculated as 1.4{3eba3d3415becf4302d80c682b6480d7b88003de9407d8cc6f062607002b4a18} in the United States but that number varies based on what you spend your money on. Costs for things like medical care, which you will probably spend more on as you get older, are much higher, 2.8{3eba3d3415becf4302d80c682b6480d7b88003de9407d8cc6f062607002b4a18} . Because of this, you’ll find living off of your Social Security fixed income harder and harder each year that you spend in retirement. You can solve for this pitfall by having retirement savings outside of your Social Security income that will help you keep up with inflation. 

5. Spouses get benefits too

What if you’re a spouse who hasn’t worked enough and doesn’t have enough credits? You may still have Social Security coverage! As long as you are at least 62 years old, you can apply for benefits when your spouse does.

Even if you’re an ex-spouse, you can still collect benefits as long as you were married for a minimum of 10 years. You will have coverage but it’s important that you know you won’t receive a full benefit. Whether you’re still married or divorced, at most, you can expect that you’ll receive half the amount your spouse’s benefit. 

6. You get a one-time reset

If you start taking benefits and for any reason change your mind, you can stop — but only once. Maybe you stop because you start working again, or maybe you decide that you want a higher benefit later in life rather than earlier.

It doesn’t matter why you stop but if you make this decision, it is time sensitive. You can initiate this one-time stop any time before the age of 70 but have to do so within 60 days of Social Security approving your benefits. 

7. You can collect while you’re still working

You can still work and collect Social Security benefits. Whether you continue working because you enjoy your work or want Social Security for supplemental income, you are allowed. There are, however, some limitations.

If you earn more than the annual limit (which for the year 2021 is $18,960),your benefit will be reduced depending on your age. If you are younger than your Full Retirement Age, you will have $1 deducted for every $2 you earn above the limit. That number changes to $1 for every $3 you earn above the limit in the year that you reach full retirement age. The annual income limit once you reach full retirement age also increases to $50,520. . In the month that you reach full retirement age, this limitation no longer applies and you can work as much as you want without worrying about your benefit being reduced. 

As long as there are workers to pay into it, Social Security will exist. Depending on how much money you’ve saved, it may not be your primary source of income in retirement, but it will be one of them. This means that it will be an important part of your retirement planning process.

Claiming your Social Security benefits is a detailed process and the more you know, the better prepared you’ll be to make important decisions. 

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