social security overview

Learn how Social Security impacts your retirement:

Social Security will not, and was never designed to, provide all the income you’ll need to live comfortably during retirement. Social Security benefits account for about 33% of the income for retirees so understanding Social Security can help you be prepared when you retire.

To factor Social Security into your retirement plan, you should know how you can enhance your benefits and how much income you may need from other sources to be financially comfortable during retirement — especially if a portion of your benefits is subject to taxation.
The basic concept of Social Security is that during their working years, all employees, employers and self-employed individuals pay Social Security taxes, which are used to finance the program.

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understanding social security

Social security is a part of the retirement plan of many American workers. Nearly 9 in 10 individuals age 65 and older receive Social Security benefits. Knowing how the Social Security system works will help you be prepared when you retire.

How do you qualify for retirement benefits?

When you work and pay Social Security taxes, you earn “credits” toward Social Security benefits. Credits are equivalent to full working quarters. You earn one credit for each quarter of your working life. For example, if you work for 1 full year, you have earned a total of 4 credits. The number of credits you need to get retirement benefits depends on when you were born. For example, if you were born in 1929 (or later) you need 40 credits (or 10 years of work) to be eligible for benefits.

How much will your retirement benefit be?

  • Your benefit payment depends on how much you earned during your working career. The size of your Social Security basic monthly benefit (what Social Security calls your primary insurance amount, or PIA) will depend on a variety of factors. They range from the number of years you’ve worked to your average earnings over your 35 highest-earning years to when you’ll start collecting the checks.
    • Higher lifetime earnings result in higher benefits. If there were some years you didn’t work or had low earnings, your benefit amount may be lower than if you worked steadily. This is directly related to the amount of Social Security you have contributed.
    • The age that you decide to retire also affects your benefit. You can choose early retirement, typically at age 62, which reduces the benefit you would get at your full retirement age. For example, Social Security suggests your benefits at early retirement would be about 25% lower than what you would receive at your full retirement age.
    • You can also choose to work beyond your full retirement age. If you do, you can increase your future benefits. If you delay retirement, each year you work adds another year of earnings to your Social Security record and increases your lifetime earnings. By delaying retirement age until age 70, you are eligible for maximum benefits.
  • Generally, you must have paid Social Security taxes for at least 10 years to qualify for your own Social Security benefits. But, if you worked a shorter amount of time, you may be able to collect benefits through your spouse, or because you are the surviving dependent parent — age 62 or older — of an adult child entitled to benefits.
  • Social Security benefits replace about 20% to 30% of preretirement earnings for the average person. But, as your income rises, the benefits replace a progressively smaller percentage, so Social Security might replace just 15% of your preretirement earnings or much less.
  • The online Retirement Estimator provides an immediate and personalized retirement benefit estimate to help you plan for your retirement. The estimator will also let you create scenarios to compare retirement options and dates as well as expected future earnings.

If you face health conditions that require you to retire early, you may want to contact Social Security to determine eligibility for Social Security disability benefits.

How do I decide when to retire?

Choosing when to retire is an important, personal decision – based on your personal needs and lifestyle. Regardless of the age you retire, contact Social Security in advance to learn about your choices and options to ensure you make the best decision. Sometimes, your choice of a retirement month could mean higher benefit payments for you and your family.

You can start collecting Social Security checks as early as age 62 but your benefit will be smaller if you aren’t at “full retirement age”, according to Social Security.

Your full retirement age is:

  • 66 if you were born between 1943 and 1954
  • Between 66 and 67 if you were born between 1955 and 1959
  • 67 if you were born in 1960 or after¹

There are special considerations and benefits for widows, widowers, spouses (current and former), children, and disabled dependents. You need to talk to Social Security to understand how the rules may apply to your situation. Because of your personal considerations and circumstances, it’s important to contact Social Security to better understand options related to your benefits. For example, if you are divorced – and were married for more than 10 years – or have an unmarried child under 18, benefits may vary. These are just 2 examples of how benefits may change based on circumstances.

You may be wondering if you adequately planning and preparing; the Ballpark E$timate is an easy-to-use, interactive tool that helps you quickly identify approximately how much you need to save to fund your retirement. The Ballpark E$timate includes projected Social Security benefits and earnings assumptions on savings in an understandable way. Creating a long-term plan can help you plan for a solid financial future.

Visit the Social Security website ( to review your statement and estimate your benefits.

How do you apply for Social Security retirement benefits?

You can apply online, by telephone or by walking into your local Social Security office. Depending on your circumstances, you will need some or all of the documents listed below:

  • Your social security number
  • Your birth certificate
  • Your W2 forms or income tax return for last year
  • Your military discharge papers (if applicable)
  • Your spouse’s birth certificate and Social Security number if they are applying for benefits
  • Your children’s birth certificate and Social Security number if you are applying for benefits
  • If not born in the U.S., proof of citizenship
  • Name, routing number, and account number of financial institution for direct deposit of monthly benefit

Will I have to pay taxes on the benefits?

About 40% of people who get Social Security have to pay income taxes on their benefits. At the beginning of each year, you will receive a Form SSA-1099 (similar to a W2) from the Social Security showing the amount of the benefits you received during the past year. You will use this form when you complete your income tax returns to find out if you must pay taxes on your benefits. While you may not be required to have Social Security withhold federal taxes, you may find it easier than paying quarterly estimated tax payments.

How might my benefits change?

If you get a pension from work for which you paid Social Security taxes, that pension won’t affect your Social Security benefits. However, if you get a pension from work not covered by Social Security – for example, the federal civil service, some state or local government employment, or work in a foreign country – your Social Security benefit may be reduced, depending on your age.

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spousal and survivor benefits

Spousal benefits

You may be able to receive Social Security spousal benefits if:

  • You are at least 62 years of age, and
  • Your spouse or ex-spouse is receiving or is eligible for Social Security retirement or disability benefits

You can collect Social Security based on your own earnings history or receive a spousal benefit equal to up to 50% of your spouse’s benefit. (Spousal benefits are not increased if you postpone taking them past your full retirement age.)

If you are divorced, you can receive Social Security benefits starting at age 62 based on your ex-spouse’s earnings record, as long as you were married at least 10 years. Once you remarry, though, you generally can’t keep collecting benefits on your former spouse’s earnings record unless your current marriage ends.

If your spouse dies, you can generally receive full Social Security benefits based on your spouse’s earnings record at your full retirement age. Or you can get reduced benefits as early as age 60. You can get reduced benefits at any age if you’re caring for a child who is under 16 or is disabled and receives benefits on the worker’s record. As a surviving spouse, you’re also typically entitled to a one-time death payment.

Visit the Social Security website ( to learn more about spousal or survivors benefits, review your statement, or estimate your benefits.

Or try this benefits calculator at the Social Security website.
Also, meet with your financial advisor to discuss the best time for you (and your spouse, if you’re married) to begin collecting your monthly Social Security checks. It’s a conversation that can pay off over the rest of your life.