Countless seniors depend on Social Security to pay the bills once they stop working. But this key program has a lot of rules attached to it, so getting your facts straight can help you make the most of those benefits. With that in mind, here are the answers to some common Social Security questions you'll hear today.
1. How old do I have to be to collect benefits?
You're allowed to file for Social Security as early as age 62, but if you don't wait until your full retirement age to collect benefits, you'll see those payments reduced. Your full retirement age is based on your year of birth, as follows:
|
Year of Birth |
Full Retirement Age |
|---|---|
|
1943-1954 |
66 |
|
1955 |
66 and 2 months |
|
1956 |
66 and 4 months |
|
1957 |
66 and 6 months |
|
1958 |
66 and 8 months |
|
1959 |
66 and 10 months |
|
1960 |
67 |
Data source: Social Security Administration.
That said, you don't have to claim benefits upon reaching full retirement age. If you hold off past then, you'll snag an 8% boost in payments for each year you delay. This incentive, however, runs out at age 70, so while you technically won't be forced to file at that point, there's no reason not to.
Image source: Getty Images.
2. Will my benefits be taxed in retirement?
If you don't have much (or any) income outside of Social Security, there's a good chance you'll collect your benefits free and clear of taxes. But if you have substantial savings to withdraw from, a part-time job, or other income, then you should expect at least a portion of your benefits to be taxed.
To see whether you'll be subject to taxes on benefits, you'll need to calculate your provisional income, which is your non-Social Security income plus half of the total amount you receive in benefits each year. Once you arrive at that number, here's where you'll stand:
|
Tax Filing Status |
Provisional Income |
Social Security Taxation |
|---|---|---|
|
Single or head of household |
Less than $25,000 |
0% |
|
$25,000-$34,000 |
Up to 50% | |
|
More than $34,000 |
Up to 85% | |
|
Joint filers |
Less than $32,000 |
0% |
|
$32,000-$44,000 |
Up to 50% | |
|
More than $44,000 |
Up to 85% |
Data source: IRS.
Therefore, if you're a single tax filer whose provisional income totals $30,000, you should prepare to be taxed on up to 50% of your benefits. On the other hand, if you're single with a provisional income of $20,000, the IRS won't come after you for a share of those payments.
3. Will my benefits ever go up over time?
Back in the day, once you started collecting Social Security, you received the same monthly benefit year after year. But beginning in 1975, the Social Security Administration started giving out annual cost-of-living adjustments, or COLAs, to help seniors retain their buying power in the face of inflation. Therefore, the amount you initially start collecting each month from Social Security could very well go up over time.
That said, COLAs aren't a given, as they're based on the consumer price index for urban wage earners (CPI-W). When consumer prices remain stagnant, recipients don't get a boost, even though the CPI-W doesn't factor in many of the expenses seniors are most impacted by. For example, Social Security beneficiaries saw no COLA in 2016 because gas prices dropped during the period in which CPI-W data for that year was collected. But fuel costs are hardly the typical retiree's largest expense.
The takeaway? While you can probably come to expect some modest increases to your benefits over time, don't count on them, and don't expect them to amount to much -- especially since your Medicare premiums might eat them up before you see them.
4. Will I automatically be enrolled in Social Security once I'm on Medicare?
No, but the opposite is generally true. Medicare eligibility begins at age 65, so if you're already collecting Social Security at that point, you'll most likely be enrolled for health benefits automatically. But since 65 doesn't constitute full retirement age for Social Security purposes, your benefits won't start coming in once you reach that age. Rather, you'll get to decide when you're ready to collect them.
5. Will Social Security be around when I retire?
Contrary to what you may have heard, Social Security is by no means going broke. In fact, the program can't ever really go broke because it's funded heavily by payroll taxes. That said, Social Security is facing a potential shortfall that, if left unaddressed, could cause benefits to get slashed by as much as 23% come 2034.
Is that good news for future recipients? Not exactly. Still, Congress has more than a decade and a half to step in with a fix, and given the number of seniors who stand to suffer were those benefits to get cut, there's a good chance lawmakers won't let that happen. Either way, your best bet is to save independently for retirement and not rely on those benefits too heavily. Even in a best-case scenario, they'll only be enough to cover some of your senior living expenses, leaving you to pick up the tab for the rest.
The more you know about Social Security, the better, even if you're fairly young and are years away from filing. It pays to read up on how Social Security works so you can make the most of those benefits when it's your turn to collect them.
