10 Things Everyone Should Know Before Claiming Social Security

Social Security could provide you with hundreds of thousands of dollars over your retirement, but exactly how much you get depends on the choices you make right now and when you sign up.

Understanding the rules surrounding Social Security is key to getting the most out of the program. Here are 10 things you should know before you sign up.

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You must earn 40 credits in order to qualify for Social Security benefits. The definition of a credit varies from year to year. In 2021, you earn one credit for every $1,470 you earn, and you can earn a maximum of four credits per year. Those who don't qualify for benefits in their own right may be able to qualify for spousal benefits if their spouse has worked long enough to qualify for Social Security.

You can check whether you're eligible by creating a my Social Security account. You'll have to answer a few questions when you first make your account to verify your identity.

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While you only need to work for 10 years in order to qualify for Social Security, you should aim to work at least 35 years whenever possible. That's because the Social Security Administration bases your benefit on your average monthly earnings over your 35 highest-earning years.

When you haven't worked for that long, you'll have zero-income years factored into your benefit. These will reduce the size of your checks. On the other hand, working longer than 35 years means your later, higher-earning years will eventually replace your earlier, lower-earning years, raising your benefit.

Your earnings record, viewable in your Social Security account, shows how much money you've paid Social Security taxes on every year that you've worked. This is the income the government bases your benefits on, so it's important to make sure it's accurate. Check yours once per year. If you notice an error, submit a Request for Correction of Earnings Record form to the Social Security Administration.

If you earn six figures, you could run into an issue where several years appear to show inaccurate income when they're actually correct. That's because your earnings record shows what you paid Social Security taxes on -- not what you earned. In 2021, you only pay taxes on the first $142,800 you earn. In prior years, this limit was lower.

The Social Security Administration assigns everyone a full retirement age (FRA) based on their birth year. For today's workers, it's somewhere between 66 and 67. You must wait until this age to sign up if you want the full benefit you're entitled to based on your work history.

You can start benefits earlier or later, and this will affect the size of the checks you receive. Regardless of when you plan to sign up, it's a good idea to know your FRA so you understand exactly how your claiming age will affect your benefits.

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Claiming benefits before your FRA reduces your checks by 5/9 of 1% per month for up to 36 months. If you begin claiming more than 36 months before your FRA, your checks are further reduced by 5/12 of 1% per month. If you sign up right away at 62, you only get 70% of your full benefit per month if your FRA is 67 or 75% if your FRA is 66.

This could still be the smart move in some situations. If you don't believe you'll live past your 70s or you can't afford to delay benefits, signing up early could be the wise choice. But if neither of those things apply, it might be wiser to delay benefits for a while.

The $17,166 Social Security bonus most retirees completely overlook
If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets" could help ensure a boost in your retirement income. For example: one easy trick could pay you as much as $17,166 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Simply click here to discover how to learn more about these strategies.

You become eligible for your maximum Social Security benefit at 70. This is 124% of your full benefit per check if your FRA is 67 or 132% if your FRA is 66. You can also start benefits at any point between your FRA and 70, and your checks will grow by 2/3 of 1% per month for every month you delay.

Though delaying benefits means you'll receive fewer checks, you could get more money from the program overall by doing this if you live long enough. For most people, that means making it to their mid-80s or beyond.

It's possible to claim Social Security while you're still working as long as you're at least 62 at the time. But if you're under your FRA, the government might withhold some of your checks. You'll lose $1 for every $2 you earn over $18,960 in 2021 if you're under your FRA for the whole year. If you'll hit your FRA in 2021, you'll lose $1 for every $3 you earn over $50,520 if you reach this before your birthday.

But this money isn't gone forever. Once you reach your FRA, the government recalculates your benefit to include the money it withheld in previous years. That means your future checks will be slightly larger, though not quite as large as they would've been if you'd just delayed benefits in the first place.

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Your spouse is entitled to 50% of your Social Security benefit at your FRA if that would give them more for what they qualify for on their own. But if you sign up for benefits early, you're also reducing how much your spouse qualifies for. The same goes for other family members who are eligible to claim based on your work record.

If you have others that are counting on your Social Security benefits, you may want to sit down with them to discuss when you ought to sign up for benefits. Married couples should work together to figure out when each person should sign up so the couple can get the most money overall.

The federal government taxes Social Security benefits if your provisional income -- adjusted gross income (AGI) plus any nontaxable interest and half your Social Security benefits -- exceeds $25,000 for a single adult or $32,000 for a married couple. Some states tax Social Security benefits as well.

This could affect how much of your benefits you get to keep and how much of your retirement expenses you have to fund on your own. Here's an in-depth guide to Social Security benefit taxes to help you learn more.

Now that you're familiar with the factors that can affect your benefit, you should have some idea of when you want to sign up. If not, you can play around with the benefit calculator in your Social Security account. This will tell you roughly how much you'll get at various starting ages depending on your income during your working years.

Once you have an estimate of how much you can expect from Social Security, you can begin to work out how much you must save on your own for retirement. If you're not able to save as much as you need to, you may have to think about delaying Social Security or working longer until you find a plan that works for you.

The $17,166 Social Security bonus most retirees completely overlook
If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets" could help ensure a boost in your retirement income. For example: one easy trick could pay you as much as $17,166 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Simply click here to discover how to learn more about these strategies.

Though the government creates the rules that determine how much you get from Social Security, you have a lot of control over the size of your checks. Use the knowledge you've gained here to maximize your benefits and understand how they fit into your retirement plan. Then, revisit that plan at least once per year to make any necessary changes.

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