Social Security Retirement Benefits

Basic information on the nation's retirement plan.

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There are many ins and outs to the Social Security retirement benefit system—most of them dependent on factors such as the type of job you hold, the length of time you work, and the age at which you retire. This article provides some basic information on Social Security retirement benefits. For more detailed information, see Nolo's Social Security Center.

Who Is Qualified

As with other Social Security benefits, you will be eligible for retirement benefits only if you have accumulated enough work credits. Work credits are measured in quarters (January through March, April through June, and so on) in which you earned more than the required amount of money. The number of work credits you need to be eligible for benefits depends on your age when you apply.

In addition, certain dependents of retired workers are eligible for monthly benefits if the worker has amassed enough work credits to qualify for benefits. Dependents who may qualify for these derivative benefits include:

  • a spouse age 62 or older
  • a spouse under age 62 who cares for the worker’s young or disabled children
  • a divorced spouse age 62 or older, if the marriage lasted at least ten years and if at least two years have passed since the divorce
  • children up to age 18 or age 19 for full-time students, and
  • disabled children.

Work Credits Required for Social Security Retirement Benefits

If you reach age 62 in:

You need this many quarters of employment:

1980

29

1981

30

1982

31

1983

32

1984

33

1985

34

1990

39

1991 or later

40

Calculating Your Benefits

Note that when the term “retire” is used by the Social Security Administration, it refers only to the date when you claim your retirement benefits. It does not necessarily mean you have reached a particular age or that you have stopped working.

The average benefit for a person who retires at age 65 is about $1,164 per month—a figure that changes based on the total amount of all benefits paid and the number of people receiving them. Whatever the amount of your retirement benefit, you will receive an automatic cost of living increase on January 1 of each year. This increase is tied to the rise in the Consumer Price Index, which measures the cost of basic goods and services.

Even if you have not worked for many years and you did not make much money in the years you did work, check your earnings record. You may be surprised to find you have quite a few quarters of credit from years gone by.

If you want to estimate the amount of Social Security benefits you are entitled to receive after you have retired from your job, you can view your Social Security Statement online by going to www.ssa.gov/mystatement/ (you'll need to create an account first).

Taxes on Your Benefits

Most Social Security retirement benefits are not considered taxable income by the Internal Revenue Service, although you do have to pay income tax on any interest you earn from saving your benefits. But, if your adjusted gross annual income—from a part-time job, for example—plus one-half of your year’s Social Security benefits adds up to $25,000 or more, then you must pay income tax on one-half of your Social Security benefits.

In January of each year, you will receive a statement from the Social Security Administration showing the amount of benefits you received in the previous year and an IRS form explaining how to report this income, if necessary.

Timing Your Retirement

You can start your Social Security retirement benefits as early as age 62, but, if you do decide to jump that gun, the benefit amount you receive will be less than your full retirement benefit amount. If you start your benefits early, they will be permanently reduced based on the number of months before you reach what Social Security defines as your full retirement age.

What is considered full or normal retirement age has traditionally been age 65. However, beginning with people born in 1938 or later, that age will gradually increase until it reaches 67 for people born in 1960 and later. For example, if you were born in 1955, the SSA currently clocks your full retirement age as 66 years and two months.

If your full retirement age is 65, but you begin to claim benefits at 62, they will be reduced by 20%; at age 63, the reduction would be about 13%; and at age 64, it is about 6%.

If your full retirement age is older than 65, you can still start your retirement benefits at 62. But the reduction in your benefit amount will be greater—up to a maximum of 30% at age 62 for people born in 1960 and later.

These days, many people are opting to (or have to) continue working full time beyond retirement age. These industrious souls can increase their Social Security benefit in two ways:

  • Each additional year a person works adds another year of earnings to their Social Security record. Higher lifetime earnings may result in higher benefits at retirement.
  • In addition, a person’s benefit will be increased by a certain percentage if he or she delays retirement. These increases, called delayed retirement credits, will be added in automatically from the time one reaches full retirement age until that individual starts taking benefits or reaches age 70.

by: Barbara Repa

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