7 key Social Security facts everyone should know

2. Calculate your Social Security benefit

The Social Security Administration (SSA) calculates your benefit amount based on the 35 calendar years that you earned the most income.

If your 35 highest earning years include 30 years of income, and five years of no income, you can still increase your monthly Social Security payout by continuing to work (even part time) during retirement.

3. Up until age 70, waiting to file increases your payment amount

The initial age at which you can claim Social Security is 62. The age at which your benefit amount caps is 70. Conversely, after you reach your FRA, waiting until age 70 to claim could increase your benefit amount by an additional 8% per year.

5. Federal income tax on Social Security benefits

Then there's taxes. The income threshold for the application of Social Security taxes is $25,000 and above for individual filers and $32,000 and above for joint filers.

Depending on your other income, up to 85% of your Social Security benefit could be subject to federal tax.   

6. Spouses can receive Social Security based on the higher-earning spouse’s benefit amount

A spousal benefit allows a lower-career-earnings spouse to receive a maximum of 50% of the higher-career-earning spouse’s Social Security benefit amount. In marriages where one spouse worked and earned a high income, while the other spouse didn’t work, or didn’t earn as much money, applying for the spousal benefit can substantially increase the lower-earning spouse’s monthly payment.

7. You might be eligible to receive Social Security on your ex-spouse’s earnings history

People who were married for at least 10 years, who are 62 years of age, or older, and who remain single, can receive Social Security payments that are up to 50% of their ex-spouse’s total benefit amount.

For some people, the good news is that, not only will your ex-spouse never know you’ve applied for benefits via their work history, doing so doesn’t in any way impact their payout. Additionally, if you’ve been divorced for at least two years, you don’t even have to wait until your ex applies for Social Security to start receiving benefits.

What's ahead for Social Security?

If you watch the news, you’ve probably heard warnings that changes are coming to Social Security. The reasons are numerous, but chief among them is that as the average age of Americans has steadily crept higher, the number of people paying into the system has proportionally declined.

Some experts claim the Social Security fund will no longer have enough to pay 100% of recipient benefits within 10 years.

It’s best to plan and prepare. Sudden, drastic changes to the program, such as the government applying taxes to 100% of benefits, or even “means testing” (wealthier recipients having their benefit amounts slashed or eliminated) are within the realm of possibility.

As with everything related to your personal financial situation and retirement, the best course of action is to educate yourself. 

If you have additional questions or concerns about Social Security, investing, retirement planning, or anything related to finance or money, we invite you to schedule a free, no-obligation, in-person (or via video conference) Social Security Consultation with one of our professional advisors.

_{[1] United Income, Capital One. 2019. The retirement solution hiding in plain sight.}