What To Expect from Social Security

If you have worked in what is considered a ‘covered employment,’ you are eligible for Social Security retirement benefits. Most employment is covered with the exception of work for a state or local government that is not covered by Social Security, Federal civilian workers hired before 1984 who declined coverage, or self-employed workers earning less than $400 a year.

Once you begin collecting your Social Security retirement benefit, which can be as early as age 62 or as late as age 70, you will receive a monthly check or direct deposit to your bank account for the remainder of your lifetime. Generally the Government adjusts the amount based on inflation.

Social Security Retirement Benefits

In order to qualify for benefits from the Social Security retirement fund, you need to have earned four credits each year; credits represent payment of Social Security taxes during a quarter of a year. You need 40 credits of covered work for Social Security eligibility, which you generally can achieve by having 10 years of work in which you paid Social Security or self-employment tax.

The Government calculates your main Social Security benefit, which is called the ‘primary insurance amount’ (PIA) based on a complicated process that factors in your 35 highest earning years. They are indexed for inflation so that all the years are roughly comparable. If you've worked fewer than 35 years, Social Security uses a zero for each of those years. Using these 35 years, the Government calculates your average indexed monthly earnings then applies a three-tiered formula that provides a higher percentage benefit to individuals with lower earnings, but a higher total benefit to people with higher earnings.

Full Retirement Payments and Benefits

Even though the Social Security benefit retirement age begins at 62, your full benefit age varies – generally between 65 and 67 – based on the year you were born. You will receive lower Social Security benefits if you choose to receive benefits before your full retirement age. If you wait to receive benefits until your full retirement age, you can increase your PIA by 6 to 8 percent for every year that you delay, in addition to any cost of living increases.

Working once you receive benefits will also affect your payments. If you begin receiving benefits before your full retirement age, the Government will reduce your benefits $1 for every $2 you earn over the annual limit. In the year you reach your full retirement age, your benefits will be reduced $1 for every $3 you earn over a different annual limit until the month you reach full retirement age. Once you reach full retirement age, you can earn as much as you want without a reduction in benefits.

Other Social Security Benefits

Disability benefits: Even if you haven’t reached retirement age but have met the work requirements, you can receive disability benefits under Social Security’s medical guidelines. These benefits will be roughly equal to what your full PIA would be.

Dependent and Survivor benefits: As a spouse of a retired or disabled worker who qualifies for Social Security retirement or disability benefits, you and your minor or disabled children also may be entitled to benefits based on the worker’s earnings. The same benefits apply to a surviving spouse of a deceased worker who qualified for benefits.