Maybe you've been collecting Social Security for a good number of months now, or even a couple of years. Or maybe you're thinking of enrolling in the program in 2024, either in conjunction with retirement or simply because you want the money you're entitled to.
The more you know about Social Security, the better equipped you'll be to make smart financial decisions, like signing up at a time that's optimal for you. So with that in mind, here are three key rules you should know.
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1. When you're allowed to claim your monthly benefit in full
The age at which you're entitled to your complete monthly Social Security benefit based on your personal income history is known as full retirement age, or FRA. If you were born in 1960 or later, FRA is 67. If you were born earlier, it could be as early as 66.
You might assume that FRA is the same for everyone, but that's not the case. You might also assume that FRA kicks in at age 65, since that's when Medicare eligibility begins.
It's true that Social Security and Medicare are related, in that they're both programs designed to help older Americans. But the rules of signing up are very different. So don't be fooled into thinking you can claim your full monthly Social Security benefit at age 65 just because that's when you're able to get health coverage through Medicare.
2. What happens when you sign up for benefits early
Even though you'll need to wait until FRA to get your full monthly benefit based on your earnings history, you are allowed to sign up for benefits before that age. In fact, once you turn 62, you can claim Social Security at any time.
But for each month you sign up ahead of FRA, your monthly benefit gets reduced. And usually, that reduction is permanent (though if you go through the process of properly undoing your filing within a year, you can avoid a lifelong hit).
So the younger you are when you claim Social Security, the more your monthly benefit will be reduced. Signing up at age 65 with an FRA of 67 will slash your monthly benefit by about 13.34%. Filing at 62, in this case, will slash that benefit by 30%.
3. How much money you can earn before having benefits withheld
The Social Security Administration allows recipients to collect monthly benefits and earn income from a job at the same time. Once you reach FRA, you can earn any amount of money without risking having some of your benefits withheld. But if you work and collect benefits prior to reaching FRA, you'll risk having some money withheld if your income exceeds a threshold known as the earnings-test limit.
If you're below FRA and are not reaching it at any point this year, the earnings-test limit to keep in mind is $22,320. In excess of that, you'll have $1 in Social Security benefits withheld per $2 of earnings.
If you're below FRA but you'll be reaching it at some point during the calendar year, the earnings-test limit that applies to you is $59,520. Beyond that, you'll have $1 in benefits withheld per $3 of earnings.
But withheld benefits are not the same as reduced benefits. If you have some Social Security income withheld this year due to earning too much, it will be added back into your monthly payments once you do reach FRA.
However, if you file for Social Security ahead of FRA, your monthly benefit will be reduced -- not simply withheld. Be sure to note that distinction.
Social Security could end up playing an important financial role in your retirement. Be mindful of these rules if you're thinking of claiming benefits in 2024, or if you're already receiving benefits and are considering getting a job to boost your income.
