As you might expect, a program like Social Security is loaded with rules. Some of them may be pretty obvious -- such as, the earliest age you can sign up is 62, and you get rewarded financially for delaying your claim up to a point. But whether you're thinking of claiming benefits this year or are already receiving them, here are a few key things you should know about Social Security.
1. How spousal benefits work
You'll often hear that if you want to collect Social Security in retirement, you need to work and pay into the program for a good number of years. That's generally true, but there may be another path toward collecting benefits without a work history of your own -- spousal benefits.
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You may be entitled to spousal benefits based on a current or former spouse's record. But it's important to know how spousal benefits work.
First, you can claim spousal benefits once you turn 62. But if you file for spousal benefits before hitting your full retirement age, you'll end up collecting a smaller amount of money each month for life.
That said, once you reach full retirement age, it pays to claim spousal benefits right away. Social Security allows claimants filing for benefits on their own earnings record to accrue delayed retirement credits for signing up after full retirement age. Those credits result in boosted monthly payments. However, those credits don't apply to spousal benefits, so there's no sense in waiting.
You should also know that your spousal benefit maxes out at 50% of what your spouse can collect at their full retirement age. And while you need to wait for your spouse to sign up for Social Security to claim spousal benefits if you're married, if you're divorced, you don't have to wait on your ex-spouse.
2. What happens when you try to undo your filing
Did you know that if you claim Social Security too early and regret your decision afterward, you're allowed to undo your filing? Though this option is only available to you once in your lifetime, it does exist. But there are guidelines you'll need to follow.
First, you'll need to withdraw your application for benefits within a year of claiming them. You'll also need to repay the Social Security Administration all of the money it paid you to get a chance at a later filing. But if you're able to make that work, you can potentially undo an early claim and sign up at a later age to lock in higher monthly payments.
3. How much income you can earn without having benefits withheld
Social Security recipients are allowed to collect benefits while working. Once full retirement age arrives, you can earn any amount of money without risking having benefits withheld. But prior to that point, you'll be subject to an earnings-test limit.
This year, the limit is $23,400, and from there, you'll have $1 in Social Security held back per $2 of earnings. If you'll be reaching full retirement age in 2025, the earnings-test limit you're subject to is $62,160. Beyond that point, you'll have $1 in Social Security held back per $3 of earnings.
Earning too much money from a job could whittle your monthly Social Security check down to virtually nothing. So you'll need to crunch the numbers to see what makes sense for your situation.
Keeping track of Social Security's numerous rules is easier said than done. And the points above are among the program's trickiest aspects. So if any of these scenarios apply to you, it's important to know what you're dealing with this year.
