Social Security, Retirement and Family Benefits

Your Own Benefits

You must have 40 credits or 10 years of work to qualify for your own social security benefit. For years before 1978, you must have earned $50 each calendar quarter for a single credit. Starting in 1978, the amount needed each quarter increased. However, you could earn all of the money in a single quarter, and be credited with four credits if you earned enough money to equal the quarterly amount times four. For example, the total amount needed to be earned for one credit in 2021 is $1,090. If you earn $4,360 in one calendar quarter, you get credit for four credits. Further earnings during that year do not count as additional credits. Moreover, earning additional credits after you have received the requisite 40 credits does not increase your benefits by itself.

Note that you do not receive credits if you work for an agency or organization that is not required to pay Social Security taxes (generally governmental entities).

When Can You Start Taking Social Security?

You can get retirement benefits at age 62, but your benefits are reduced since you did not wait to receive benefits until "full retirement age". Social Security says that your benefits are reduced approximately 30% if you retire at age 62 (the reduction is 20% if you retire at age 64). For people born before 1938, "full retirement age" is 65. For people born in 1938 or after, "full retirement age" will increase depending on when you are born. If you are born from 1943-1954 you will reach full retirement age at 66. If you are born between 1956 and 1959 you will reach full retirement age at age 66 and 4 months. If you are born from 1960 and later, you will reach full retirement age at 67.

You will automatically receive Medicare benefits, if you receive Social Security Retirement benefits at age 65. Starting Social Security at age 62 will not get you Medicare until you reach 65. However, even if your "full retirement age" is older than 65, you still get Medicare at age 65 even if you elect not to receive Social Security retirement benefits at that age.

Termination of Benefits

Your last benefits are payable in the month before the month in which you die. In other words, you must live to the last day of the month to be eligible for that month's benefits. For this reason, persons controlling your bank account will need to refund the benefit paid during the month of your death.

Amount of Benefits

There are several steps to calculate the amount of your social security benefit. The first step is to adjust your actual earnings to account for changes in average wages since the year in which you earned them. After this adjustment, your benefits are based on an average of the 35 highest years of adjusted earnings. Years in which no earnings occurred can be counted towards the 35 year average, if needed. For higher paid workers, the amount of benefits is generally equal to 25 percent of pre-retirement earnings. For lower paid workers, the benefit is generally equal to 55 percent of pre-retirement earnings. The average individual gets 40% of pre-retirement earnings.¹

Each additional year you work beyond your full retirement age will impact your benefit eligibility level in two ways. First, if you have high earnings, you can increase your benefit amount because it will be added to your 35 year average. Second, if you work past "full retirement age", your benefit will increase automatically by a certain percentage, based on your year of birth for each year you work up to age 70 (assuming you work until age 70).

If you are employed while you are receiving retirement benefits, your earnings after you reach "full retirement age" do not change. However, if you are younger than "full retirement age" and receiving social security, the amount of your benefits can be reduced if you exceed the annual limit. The general rule is that once your earnings exceed an annual limit (which changes each year), your benefits are reduced by $1 for every $2 in earnings above that annual limit. For 2023 the annual limit is $21,240. In the year you reach full retirement age, your benefits are reduced by $1 for every $3 you earn above a different limit. For 2023, that annual limit is $56,250.

Special Reduction of Benefits

Your benefits may be reduced if you worked for an employer that does not withhold Social Security taxes and you get a pension from that employer. The best example is if you worked for the federal government, certain state governmental agencies or employers in foreign countries. This is referred to as the "Windfall Elimination Provision". The rationale is that Social Security is meant to replace only a portion of your pre-retirement earnings. If you worked for a non Social Security contributing employer, your benefits based purely on your earnings for another employer that paid Social Security taxes would give you a higher percentage of your pre-retirement savings than other participants in Social Security without this reduction.

Are Your Social Security Benefits Taxable?

Your benefits can be taxed. If you file as a single individual, and your income is between $25,000 and $34,000, 50% of your benefit will be added to your income. If your income exceeds $34,000, 85% of your Social Security benefit will be subject to income tax. For couples filing jointly, the combined income levels are $32,000 to $44,000 for one-half of your benefits to be taxed, with 85% of your benefits being taxed if your combined income exceeds $44,000.

Spousal Retirement Benefits

There are two general rules with respect to spousal benefits. First, your spouse cannot receive benefits from your account until you are receiving benefits. Second, your spouse can receive one-half of your monthly benefit amount, if he or she retires at their "full retirement age". Your spouse can retire as early as age 62, but benefits will be reduced, depending on the spouse's "full retirement age". This could lower your spouse's benefit to as little as 32.5% of your benefit. Your spouse can qualify for Medicare at age 65 based on your eligibility for Social Security benefits.

Your spouse can retire at an age earlier than age 62 if he or she is taking care of a child eligible for benefits under your earnings record if the child is under the age of 16, or disabled. Your spouse will receive a full one-half benefit amount if these conditions are present.

If your spouse has worked and has 40 quarters of coverage, he or she may be eligible for benefits on their own earnings record. In this case, Social Security will give your spouse either the amount he or she is eligible for under their own earnings record, or the amount they are eligible under your earnings record, whichever is greater.

A divorced spouse can receive retirement benefits based on your earnings record beginning at age 62, if you were married for at least ten years, and if your divorced spouse remains unmarried. As with your married spouse, your divorced spouse will receive benefits based upon the greater of the amount they are eligible for under your earnings record, their own earnings record, or the earnings record of another person. The benefits paid to your divorced spouse will not impact the amount of benefits you or your current spouse receives.

Widows' or Widowers' Benefits

Widows' or Widowers' benefits can begin at age 60. If you receive widows or widowers' benefits at age 60, your own benefits will be reduced. If you wait until "full retirement age" to retire, then you receive 100% of your deceased spouse's benefit level. As with all other spousal benefits, if you are entitled to benefits on your own earnings record, or that of another, you will receive the largest benefit.

If you remarry before reaching age 60, you cannot receive widowers' benefits as long as you remain married. If you remarry after age 60, you can receive benefits based on your new spouse's earnings record, or your deceased spouse's earnings record, but not both.

There is a special rule for newly married spouses when the wage earner dies prematurely. As long as you were married to the wage earner for at least nine months, there is no problem. However, if the wage earner died less than nine months after the marriage, you must show that the wage earner was reasonably expected to live nine months, and that the death was "accidental".

Other exceptions to the nine month requirement are that you had previously been married to that person for nine months, that you and that person were the natural parents of a child, or you had adopted their child during the marriage, or both of you had adopted a child during the marriage.

Children's Benefits

Children may receive Social Security benefits based on your earnings record if you are receiving retirement benefits, or you have died. Your children must be unmarried, under the age of 18, or 18-19 years old and a full time student at a level no higher than grade 12, or be 18 or older and disabled from a disability that began before they reached age 22. Adopted children and stepchildren are included in the category of individuals who can receive these benefits.

Each child can receive up to one-half your full retirement benefit. However, there is a limit to what your entire family can receive based on your earnings record. The total amount payable to other family members is usually limited between 150% to 180% of your retirement benefits (divorced spouses are not included in this calculation). Thus, your spouse's benefits can be reduced because of the number of children eligible to receive benefits based on your record.