The majority of American workers pay Social Security taxes during their working lives through recurring payroll deductions. A regular monthly benefit in retirement is the expected payoff. Because full retirement age varies depending on your birth year and benefits are based on lifetime earnings, many workers have questions about eligibility, the best time to retire and how to apply.
Eligibility for partial benefits begins at age 62. However, retiring early means a significant reduction in monthly benefits, up to 25 percent for some people. Full retirement age is based on birth year. For example, workers born in the years 1943 to 1954 are eligible for full retirement benefits on their 66th birthday. After 1954, full retirement age gradually increases in two-month increments until age 67 for workers born in 1960 or later.
How to Apply
The SSA offers an online tool where workers can complete the application process from home. It is recommended that you do not access the system on a public or otherwise insecure computer, such as at the local library. Additional options include applying at the local SSA office or phone 1-800-772-1213.
Your 'Banked' Credit
You can visit the Social Security Administration website and create a personal account to find out how many credits you have and an estimate of future benefits. Remember one credit equals three months of work. Be sure when you access the site, the web address showing in your Internet browser bar ends in a .gov/ suffix. The forward slash, as shown, should always follow the suffix.
Social Security benefits are taxable in some circumstances. It all depends on if the beneficiary receives other income and from what source. In 2015, for example, if combined income is more than $25,000 but less than $34,000, 50 percent of benefits may be taxable. The Internal Revenue Service defines "combined income" for this purpose as one-half of Social Security benefits plus adjusted gross income plus nontaxable interest. If combined income exceeds $34,000, then as much as 85 percent of Social Security benefits may be taxable.
Employees of government agencies who did not pay into the Social Security system while employed will have Social Security retirement benefits reduced by up to two-thirds of the government pension amount. For example, a worker who receives $1,200 monthly from a government pension would have $800 taken from Social Security benefits each month.
When to Take Benefits
It's a personal choice when to claim benefits. Delaying benefits to a later age can increase monthly benefit amounts. However, according to the SSA, lifetime benefits are approximately the same no matter whether the recipient begins receiving benefits at age 62, age 70 or somewhere between, assuming the recipient meets the average life expectancy.
- Internal Revenue Service: Regular & Disability Benefits
- Social Security Administration: Apply for Social Security Benefits
- Social Security Administration: Benefits Planner: Income Taxes and Your Social Security Benefits
- Social Security Administration: Government Pension Offset
- Social Security Administration: Retire Online
- Social Security Administration: Retirement Benefits
- Social Security Administration: When to Start Receiving Retirements Benefits
Vicki A Benge began writing professionally in 1984 as a newspaper reporter. A small-business owner since 1999, Benge has worked as a licensed insurance agent and has more than 20 years experience in income tax preparation for businesses and individuals. Her business and finance articles can be found on the websites of "The Arizona Republic," "Houston Chronicle," The Motley Fool, "San Francisco Chronicle," and Zacks, among others.