Social Security is a confusing program, although it's an important one. There are a huge number of different rules that can affect the amount of retirement income you receive and the types of benefits you're eligible for.
Unfortunately, if you don't understand some basics, you could end up not claiming all the benefits you're entitled to or inadvertently getting less money than should be available. You don't want to face these undesirable outcomes that shrink your retirement income, so make sure you're aware of these three weird rules that often take people by surprise.
1. You may still be able to collect spousal or survivor benefits after divorce
Social Security survivor and spousal benefits are crucial income sources for millions of people who either don't qualify for their own benefits or who can get more money by claiming benefits calculated using the work history of a higher-earning spouse.
Unfortunately, far too many people believe you must be currently married to benefit from these programs. And that's simply not the case. The reality is, anyone who was married for at least a decade before divorce can claim these benefits. This is true for survivor benefits if you didn't remarry prior to age 60, or prior to age 50 if disabled. And it's the case for spousal benefits if you haven't remarried at all.
The Social Security Administration doesn't always alert divorced people to the fact they could get higher monthly checks by claiming on an ex's work history. It's up to you to know these rules if you've had a marriage that ended and want to maximize your retirement income.
2. You can work an unlimited amount while getting benefits after full retirement age -- but can be penalized for working beforehand
Another weird Social Security rule has to do with working while getting benefits. If you decide to double-dip and get a paycheck while still collecting retirement income, you may be surprised to find your Social Security benefits are reduced or stop altogether in some cases.
If you've already reached your full retirement age (FRA), you're free to work as much as you want in your senior years without losing any Social Security income. Full retirement age depends on when you were born, but it falls between ages 66 and four months and 67. If you've hit this milestone, don't worry about how big your paycheck is -- you can still collect your retirement checks (although it is possible you could find yourself being taxed on more of your benefits).
If you're under FRA, though, you're at risk of forfeiting some of your Social Security funds temporarily. You'll lose:
- $1 for each $2 earned above $19,560 per year or $1,630 per month if you won't reach FRA at all during the year you're working.
- $1 for each $3 earned above $51,960 per year or $4,330 per month if you'll reach FRA at some point.
The Social Security Administration stops sending entire checks to cover the amount you forfeit. Then once you've reached your full retirement age, benefits are recalculated, and your monthly income goes up a bit. The Social Security credits you back the early filing penalties you were hit with for an early claim, so you're no longer assessed the penalty in any month when you didn't get a check.
This rule may come as a big shock if you were anticipating being able to get Social Security benefits while earning outside income to supplement them.
3. You can't earn delayed retirement credits on spousal benefits
Finally, if you are claiming spousal benefits, you may be surprised to find that while early filing penalties can reduce them, you have no opportunity to earn delayed retirement credits to raise the amount you receive.
Since you can't get more than 50% of your spouse's standard benefit, there's no use in waiting beyond your own full retirement age to claim Social Security spousal benefits. If you do delay longer you'd leave money on the table for no reason at all.
These three rules can be surprising, but they're worth knowing to ensure you get the full amount of monthly Social Security income you deserve.