5 Things You Need to Know about Social Security
Understanding important facts about this program for retirees and people with disabilities
Social Security affects nearly all Americans. It helps provide income to over 68 million people, or more than 1 in 5 U.S. residents. Those not collecting checks are likely contributing to Social Security, most often through automatic withholding from their paychecks. Think of it as an insurance program you pay into while you work, then collect from when you reach retirement age or are no longer able to work.
Here are five facts you need to know about Social Security:
1) The more you earn, the potentially bigger your check. Social Security benefits are based on your highest 35 years of earnings. The higher your earnings, the potentially greater your benefits, up to a maximum amount — $137,700 for 2020. (That figure is also the maximum amount of your earnings that is subject to Social Security taxation.) But Social Security benefits are progressive, meaning lower-paid workers collect a greater percentage of their earnings than higher-paid workers.
2) The amount you collect also depends on when you choose to claim your benefits. Generally, you can start collecting monthly Social Security checks at age 62. But if you do so, you won't receive your full retirement benefit. To get your full benefit, you have to wait until your full retirement age — 66 or 67, depending on the year you were born, for most current workers. And if you wait longer, you can collect even more each month. That’s true until age 70, after which the amount no longer increases. The best time to claim your benefits depends on your marital status, health, employment status and financial needs.
3) You can collect Social Security even if you’re working. Once you reach full retirement age, your benefits will be exactly the same whether or not you’re bringing in earnings from a job. If you haven't yet reached retirement age, though, your benefits will be reduced substantially if your income from work exceeds a certain threshold ($18,240 per year in 2020).
4) Social Security provides benefits for spouses. If you’re married, you can generally collect a benefit equal to half of your spouse’s if your benefit would otherwise be less than that figure. Married couples should be strategic about which benefits they claim first in order to maximize their total Social Security income. If you’re divorced and haven't remarried, you can collect the spousal benefit if your ex-spouse is 62 or older as long as your marriage lasted at least 10 years.
5) Social Security also pays out survivor and disability benefits. A surviving spouse is generally entitled to their deceased partner’s Social Security benefits. If the partner already claimed their benefits, the surviving spouse receives the total amount of those checks. If the partner did not claim benefits, the survivor can start collecting their spouse's full retirement benefit at age 60. The payouts begin immediately if the survivor is caring for children under the age of 16.
Disability benefits, meanwhile, go to people of any age who can’t work for medical reasons. Disabled survivors are eligible for survivor benefits starting at age 60. In both cases, the disability must make it impossible to work for at least a year for the person to qualify for the benefits.
Source: Social Security Administration, as of June 2020.
Invest for your future with an Empower Investment Account