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9 Frequently Asked Social Security Questions

By Matthew Frankel, CFP® - Updated Feb 23, 2018 at 3:54PM

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Here are nine things Americans should know about Social Security benefits, but often don't.

Do you know if you're eligible for Social Security retirement benefits, or how much your benefits could be? Social Security is a source of retirement income that's relied upon by millions of Americans, but there are many aspects of the program that are unknown or misunderstood by some people. Here are nine of the most common Social Security questions you may have, and the answers to clear up any misconceptions.

1. Am I eligible for Social Security?

To be considered "fully insured" for Social Security purposes, and therefore eligible for a retirement benefit based on your work record, you need 40 "quarters of coverage." One quarter of coverage represents $1,320 of earnings through employment covered by Social Security -- that is, where you pay Social Security payroll tax. You can earn a maximum of four quarters of coverage per calendar year.

For most people, the simple way to say this is that you'll need to work for at least 10 years with earnings greater than $5,280 (in 2018 dollars) per year.

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2. How is my starting benefit determined?

While you're eligible for benefits with 10 years of work experience, it's important to realize that Social Security considers much more than that. Specifically, all of your career Social Security-taxed earnings, indexed for inflation, are considered. The 35 highest-earning index years are then averaged together and divided by 12 to produce your average monthly indexed earnings. If you've worked for fewer than 35 years under covered employment, zeros are used in the calculation for the missing years.

This average is then applied to a formula, set by the Social Security Administration (SSA) each year. For 2018, the formula is:

  • 90% of the first $896
  • 32% of the amount greater than $896, but less than $5,399
  • 15% of the amount greater than $5,399

3. When can I get my retirement benefit?

You can start receiving Social Security retirement benefits as early as age 62, or as late as age 70. However, if you start before you reach full retirement age (66 to 67 years old, depending on when you were born), your benefit will be permanently reduced. Conversely, if you delay Social Security until after your full retirement age, your monthly benefit will be permanently increased.

4. How is the annual cost-of-living adjustment (COLA) determined?

The short answer is that the annual COLA (if any) is based on inflation. The longer answer is that the way inflation will be determined is changing. Historically, the consumer price index for urban wage earners (CPI-W) was used, while the recently passed tax reform bill changes this to the "Chained CPI," which generally grows slower.

5. Can I claim Social Security while I'm still working?

Yes, you can claim Social Security if you're still working, as long as you're at least 62 years old. However, depending on your age and how much you earn, your benefit may be reduced. This is known as the Social Security earnings test, and only applies to people who have not yet reached their full retirement age. And it's important to clarify that any benefit reduction due to the earnings test is really a withholding that can make your retirement benefit permanently higher after you reach full retirement age.

6. My spouse didn't work. Does he or she get anything from Social Security?

Social Security has a program known as spousal benefits for the purpose of providing additional retirement income to couples where one spouse was the primary earner. You can read my full discussion of spousal benefits, but the short version is that if one spouse's own retirement benefit is less than half of the primary earner's, a spousal benefit will kick in to make up the difference. In other words, if your benefit at full retirement age is $1,800 per month, your spouse's benefit at their full retirement age won't be less than $900.

7. Are Social Security benefits taxable?

Maybe. The IRS uses a number called your "combined income" to determine the taxability of your Social Security. This consists of your modified adjusted gross income (MAGI), any tax-exempt interest income, and one-half of your Social Security benefits. If this is greater than $34,000 (single) or $44,000 (married), up to 85% of your benefits can be taxable. If your combined income is less than this threshold, but greater than $25,000 (single) or $32,000 (married), up to 50% can be taxed.

The general effect is that if Social Security is your primary source of income in retirement, you likely won't pay tax on your benefits. However, if you have substantial income from your other savings, or from work, some of your Social Security benefits can be taxable.

8. How do I apply for Social Security?

It's 2018, so the answer shouldn't surprise you. Online is the easiest and most efficient ways to apply for your benefits. You can do so on, and it should take about 15 minutes. Alternatively, you can apply by phone, or in person at your closest Social Security office, but it's a smart idea to make an appointment first if you choose the latter.

9. Is Social Security going broke?

There are several misconceptions and exaggerations about Social Security's finances. For example, "Social Security is bankrupt," or "Social Security was raided by the government and has no money," are common statements I hear from friends. So, as a final answer, let's set the record straight.

Social Security is not broke, nor did the government steal its reserves. In fact, Social Security has close to $3 trillion in reserves as I write this, and the program is expected to run a surplus for the next few years. After that, however, is the problem. Thanks to the ongoing retirement of the baby boomer generation and the fact that Americans are living generally longer lives, there will soon be too many people collecting benefits and not enough paying in. According to the latest projections, Social Security is expected to run out of money in 2034.

That is, unless something changes. Through tax increases, benefit modifications, or some combination of the two, Social Security can be brought to long-term solvency, and if history is any indicator, that's exactly what will happen. The exact reform package that will ultimately be passed is anyone's guess at this point, but Social Security isn't broke, and even if it runs out of money, incoming tax revenues will likely be enough to pay more than three-fourths of benefits.

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