Hundreds of millions of Americans have benefited from Social Security during its history, and millions more will earn benefits in the future. The program can be complicated, and it's not always obvious how Social Security benefits work. With that in mind, below are six key Social Security rules that include the most important elements of the program and how to get the monthly checks that you deserve.
1. Rules on eligibility to get Social Security retirement benefits
In general, Social Security requires workers to have 10 full years of work history in order to qualify for retirement benefits. Strictly speaking, the requirement involves earning 40 work credits, with workers eligible to receive up to four credits per year. It takes earnings of $1,300 in 2017 or $1,320 in 2018 to get a credit, which means that as long as you have more than $5,200 or $5,280, respectively, in earnings for those years, you'll max out your credits and be on track to earn full benefits within a 10-year period.
2. Rules on eligibility for Social Security spousal benefits
Most current spouses and some divorced ex-spouses can claim spousal benefits under Social Security. If you've been married for a year or more, then you can qualify for spousal benefits under your current spouse's work history. Moreover, if you're married to a parent of minor children, then you're immediately entitled to Social Security even if you haven't reached your first anniversary.
Divorced spouses can also claim spousal benefits, but only if they were married long enough. The threshold is 10 years, so if you weren't married that long, then you won't be able to get benefits based on your ex-spouse's work record. Moreover, even if you were married long enough, you can't claim benefits on an ex-spouse's work history if you've remarried in the interim.
3. Rules on when you claim Social Security
Typically, if you're seeking retirement or spousal benefits, then 62 is the first age at which you can file for Social Security. Exceptions apply to those who are parents of children who are either minors, disabled, or in high school and 19 or younger. In that case, a spouse can claim spousal benefits even if they haven't reached age 62.
Other rules apply for survivor benefits. Here, the earliest age to file is typically 60, but for a surviving spouse who's disabled, claims as early as age 50 are permitted.
4. Rules for determining benefit amounts
Social Security benefits are based on a multi-step calculation that begins by looking at a person's 35 top years of earnings after indexing them for inflation. From there, the Social Security Administration takes average indexed earnings and then plugs them into a formula to determine your primary benefit amount. That's the baseline that the SSA then uses to determine your actual payout after applying reductions or credits depending on the timing of when you file. Different types of benefits also have different baselines. For instance, spousal benefits are typically equal to 50% of the working spouse's primary insurance amount.
5. Rules for taxing Social Security benefits
Many people don't know that Social Security benefits can be subject to income tax. To figure out if your benefits could be taxed, take half your annual Social Security benefits and add it to your other income. If the sum is $25,000 or more for single filers or $32,000 or more for joint filers, then up to half your benefits could be included as taxable income. Higher income levels -- $34,000 for singles and $44,000 for joint filers -- can boost the taxable amount to up to 85% of your benefits. The net impact is to take some benefits away from those who arguably can afford it, but many still oppose the effective means-testing nature of the tax.
Know your Social Security
You need Social Security, so having a handle on its rules is essential. Keep these five rules in mind, and you'll be in a better position to prepare for retirement and plan your benefits.