What you should know before taking Social Security

If you’re getting close to retirement, you’re probably thinking about when you should start your Social Security payments. You may not realize it, but determining when affects your monthly income for the rest of your life and, possibly, your spouse’s life. Learn what you need to know before you apply for Social Security benefits.

How do you find out how much Social Security you’ll receive?

How much Social Security you’ll receive is determined by your highest 35 years of earnings.1 You can estimate your personalized benefits and see the impact of starting at different ages by creating an account at ssa.gov.

Is it better to take Social Security at age 62 or 67?

The answer depends on your financial situation. Once you reach full retirement age (FRA), which varies based on the year you were born, you’re entitled to your full benefit.

Full retirement age by year

Year of birth² 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

You can apply for your benefit as early as age 62, but your payment is reduced because you’ll receive four to five more years’ worth of income.3 On the other hand, you can increase your payment amount by delaying up to age 70 (there’s no benefit to waiting beyond age 70).4 Whether you start sooner or later, your payment gets locked in, so be sure of your decision.

When you start receiving Social Security matters

The monthly payment varies based on the age you start receiving benefits

Source: “When to Start Receiving Retirement Benefits,” U.S. Social Security Administration, 2021. The illustration assumes a $1,000 benefit at a full retirement age (FRA) of 66 and 10 months.

Can you keep working and get Social Security?

You can keep working while receiving Social Security, but your payments will be reduced if you haven’t reached full retirement age and you make more than certain thresholds. If your benefit payment is reduced because you’re still working, your benefit will increase to make up for prior reductions when you reach full retirement age.5

How working can affect your Social Security benefit

If you're ... You can make up to ... If you earn more, your benefit will be reduced by ...
Younger than full retirement age $18,960 per year without reducing your benefit $1 for every $2 earned above $18,960
In the year you reach full retirement age but before the month you reach it $50,250 per year without reducing your benefit $1 for every $3 earned above $50,250
In the month you reach full retirement age or older No income limits Nothing

Dollar thresholds listed are for 2021.

At what age is Social Security not taxed?

Social Security doesn’t stop getting taxed because you reach a certain age; it depends on how much money you make and your tax filing status. The income that matters is your combined income—50% of your Social Security income, plus 100% of all your other income, including wages, pension income, interest, dividends, and capital gains.6

How Social Security gets taxed

Filing status Combined income Social Security that's taxable
Single Less than $25,000 0%
$25,000–$34,000 50%
More than $34,000 85%
Married filing jointly Less than $32,000 0%
$32,000–$44,000 50%
More than $44,000 85%

Visit ssa.gov to view other filing statuses.

If you’re single and have a combined income greater than $34,000, then 85% of your Social Security income will be taxable income.

Are you getting a raise on your Social Security?

Each October, the U.S. Social Security Administration (SSA) determines if a cost-of-living adjustment—a raise—will apply for the following calendar year’s payments based on changes in the Consumer Price Index (CPI)—a way to measure inflation. There’s no guarantee that a change will occur, but if there is, it’ll apply to all 12 payments in the following calendar year. For example, the SSA recently announced a 5.9% increase to all 2022 payments, the largest increase since 1982.7

How does your decision affect your spouse’s benefit?

Spouses are entitled to the greater of their benefit or 50% of your benefit. If you decide to receive payments before reaching full retirement age, it reduces what your spouse could make. Conversely, if you delay your payment, both your and your spouse’s benefit could be increased.

A lot goes into your Social Security decision

There’s a lot to consider when deciding to start your Social Security benefits. You should also know that Social Security is expected to run out of reserves by 2034. That doesn’t mean the program will go away, but it could lead to potentially smaller payments since annual tax revenue is expected to cover about 78% of benefits.8 By growing your 401(k) or other retirement accounts, you can help reduce your reliance on Social Security and give yourself some flexibility for when you start receiving benefits.

Starting your Social Security benefits is personal to you and your financial situation. But remember, once you submit your application and start getting payments, your decision is final, so consider the impact on your long-term retirement income before you do.

1 “Social Security Benefit Amounts,” U.S. Social Security Administration. 2 “Retirement Benefits,” U.S. Social Security Administration, January 2021. 3 “Benefit Reduction for Early Retirement,” U.S. Social Security Administration, 11/25/08. 4 “Delayed Retirement Credits,” U.S. Social Security Administration. 5 “How Work Affects Your Benefits,” U.S. Social Security Administration, 2021. 6 “Don’t forget, Social Security benefits may be taxable,” U.S. Internal Revenue Service, 6/25/20. 7 “Cost-Of-Living Adjustments,” U.S. Social Security Administration. 8 “How much longer will Social Security be around?” AARP, 9/1/21.

The content of this document is for general information only and is believed to be accurate and reliable as of the posting date, but may be subject to change. It is not intended to provide investment, tax, plan design, or legal advice (unless otherwise indicated). Please consult your own independent advisor as to any investment, tax, or legal statements made herein.

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