We have focused this past couple of months on the ins and outs of Social Security. With its benefits accounting for over 40% of today’s retiree’s income, its reach touches and impacts many lives.
Even though it is a vast system that many people partake in, it still brings about confusion and frustration for many. We would like to help assuage that confusion, turning trepidation into secure knowledge.
The question we will tackle today is:
When am I eligible for Social Security benefits?
Work, Work, Work
The Social Security Administration (SSA) grants retired workers compensation for their many years of work based on their individual work record. This means that your Social Security check will be directly correlated to the amount of time you spent working.
Why does it operate like this?
Well, when you are employed you and your employer split a Social Security tax of 12.4%, with 6.2% coming from your paycheck and 6.2% coming from theirs. It is important to note that if you work for yourself, you will be responsible for the entire 12.4%. Social Security tax also has a wage based limit, which means the maximum wage that is subject to tax for a given year. In 2019, that limit is $132,900.
As you are working you contribute directly to Social Security through the Federal Insurance Contributions Act (FICA). The idea is that you contribute to the fund while you are working and receive the funds when you are retired.
Since your Social Security benefit is tied to your work record, it makes sense that the SSA uses work credits to help calculate a benefits package. These work credits are based on the amount of money you earn. It is this earning and work history that is used to qualify you for retirement, disability, and other benefits.
In order to begin collecting Social Security, you need to accumulate 40 work credits which often amounts to 10 years of working. It is important to know that there are other factors working in tandem to determine the amount of your benefit including age and disability. For example, if you are 25 and worked for 10 years, you cannot claim benefits at 35 unless you qualify for disability pay.
In 2019, one work credit is equal to every $1,360 made. Work credits are tied to a specific dollar amount, not the number of years worked. This does impact lower-income families as they will need to work more hours to meet the $1,360 threshold which in turn gets them the credits. Be mindful of this limit so you know how many credits you are earning per year. There is a maximum of four work credits you can receive per year.
You probably have heard the saying “age is only a number.” The Social Security Administration doesn’t see it that way. In terms of Social Security benefits, age matters a lot. Along with your work record, it is the most important factor in determining your eligibility. In general, there are three times you can begin collecting benefits:
When you turn 62
When you reach full retirement age
When you turn 70
Anytime between your 62nd birthday and your full retirement age is considered early to the SSA and your benefit will reflect that. Your total benefits, known to the SSA as your primary insurance amount (PMI) will decrease by about 30% over the course of your retirement. Of course, there are many reasons why people collect early: health, income needs, retirement plans, etc.
Your second option is to wait to claim benefits until your full retirement age. This age is set by the SSA. Please see the chart below to see where you fall.
Year of Birth
Full Retirement Age
1937 and Earlier
65 and 2 Months
65 and 4 Months
65 and 6 Months
65 and 8 Months
65 and 10 Months
66 and 2 Months
66 and 4 Months
66 and 6 Months
66 and 8 Months
66 and 10 Months
1960 and Later
Source: Social Security Administration
If you wait to claim your benefits until your full retirement age, you will receive 100% of your benefit which will increase your monthly payments, giving you more income in retirement.
The last option is to delay benefits until you are 70. Delaying benefits will actually get you more than 100% of your full benefit, often surpassing it by 25% or more. This increased monthly payment can help you pay for health expenses, extra retirement travel, estate planning, etc.
Social Security benefits are an imporant part of many people’s retirement plans. There are a few boxes to check off of your list before you can start collecting those benefits:
You have at least 40 work credits
You are at least 62 years old
Understanding how the system works will give you better insight into how it can be applied to your own situation. Are you considering when you should take your Social Security benefit? We love helping our clients feel knowledgable and empowered by their retirement income, so give us a call!