Social Security is likely to provide more than half of your income as a senior, but chances are good you don't really understand how the program works. Social Security's rules are undoubtedly confusing, especially as you try to figure out when you actually become eligible for benefits.
These three key facts below will help you to become better informed about the rules for claiming benefits, so read on to find out some essential info about Social Security eligibility.
1. Your benefits could be reduced if you don't work at least 35 years
More than 90% of older adults don't know how to maximize their Social Security benefits, according to a survey conducted by Nationwide. To understand how to maximize benefits, you need to know how the Social Security Administration (SSA) calculates the amount you'll receive.
The SSA utilizes a formula that involves adjusting all your earnings from past years to reflect wage growth and find out what your annual wages would be worth in today's dollars. The SSA then uses your highest 35 years of earnings to calculate your Averaged Indexed Monthly Earnings (AIME). The Social Security benefit formula is applied to AIME to calculate your Primary Insurance Amount, which is your standard benefit you'll be paid at full retirement age.
The problem is, not everyone works for a full 35 years. You may have started your career late, may be retiring early, or may have taken time off to raise a family. If you don't have 35 years worked, the Social Security Administration averages in years of $0 earnings. If you worked only 25 years, you'd have 10 years of $0 averaged in. This can lower your benefits a lot, so if you don't have 35 years of work, you may want to consider working longer or researching to find out if you can qualify for more money by claiming benefits on your spouse's work history.
2. You must work for a minimum of 10 years to claim benefits on your record
To qualify for Social Security benefits, you need to earn work credits. In 2018, you can earn one work credit for each $1,320 in earnings you have. However, you're only allowed to earn four credits in any given year.
The amount you must earn to get a work credit adjusts upward annually to account for wage growth, and you must have at least 40 credits to become eligible for retirement benefits. Because you can only earn four credits a year and you need 40 credits, you have to work for at least 10 years to get benefits.
3. You can claim benefits on your spouses work record -- even if you're divorced or your spouse is deceased
Regardless of whether or not you're eligible for your own benefits, you may be able to claim Social Security based on your spouse's work record.
If you're still married and your spouse is still alive, you can claim on your spouse's work record as long as you're over 62 years old and your spouse is already receiving either retirement or disability benefits.
If your spouse is deceased, you can obtain survivor's benefits if you're 60 or older. If you're disabled, you can obtain survivor's benefits if you're 50 or older. You can also obtain survivor's benefits if you are raising a minor or disabled child of the deceased person. If you retire before the full retirement age for survivors, your benefits will be reduced.
If you're divorced after having been married for at least 10 years, you can claim spousal benefits if your spouse is alive and survivor benefits if your spouse is deceased. You can claim these benefits regardless of whether your spouse has remarried or not, as long as you aren't remarried. Your ex-spouse doesn't have to retire before you can claim benefits on his or her record if you claim benefits as a divorcee as long as you've been divorced for at least two years.
When should you claim your benefits?
Deciding when to claim Social Security benefits is complicated, particularly since if you retire either before or after full retirement age, the Social Security Administration will adjust your benefit either up or down based on the age at which you retire.
You need to take into account how long you've worked, how old you are, and what spousal benefits you're entitled to in order to make the most of the Social Security income you'll receive. If you're confused about where to start, you may want to talk with a financial expert experienced in Social Security claiming strategies so you can maximize your retirement income.