15 FAQs About Claiming Social Security

All workers pay into it, and most of us will claim benefits when we're old enough, but how much do you actually know about Social Security? It's a government program designed to provide a steady stream of income to seniors, but not everyone gets the same amount.

If you want to get the largest possible checks, it helps to understand how the government calculates your benefits and how your decisions can affect them. Here are answers to 15 of the most common Social Security questions.

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In order to qualify for Social Security, you must earn 40 credits. A credit is defined as $1,470 in earnings in 2021, though this amount varies from year to year. You can only earn up to four credits per year, so you must work at least 10 years in order to be eligible for Social Security. However, these years don't have to be consecutive.

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The 40-credit rule applies if you're claiming benefits on your own work record. But you may be able to claim benefits on a family member's work record, even if you never worked at all. Spouses of qualified workers and ex-spouses, if married to the worker for at least 10 years, are eligible for benefits, as are dependent children. Surviving spouses and dependent children and parents of deceased workers may also qualify for benefits.

The worker's status and your relationship to the worker determine when you can sign up and how much you'll get. If the worker is still living, spouses must wait for the worker to sign up for benefits before they can claim. Surviving spouses and ex-spouses may be able to claim right away if caring for the worker's dependent child.

Typically, you become eligible for Social Security at age 62 and can sign up anytime after your birthday. But there are a few exceptions.

Disabled workers may qualify for Social Security disability benefits well before 62. And if you're caring for a deceased or disabled worker's child under 16, you and the child can sign up for benefits right away.

Everyone gets a different amount from Social Security. It's impossible to say with certainty how much you'll get if you're not ready to sign up right now. The Social Security Administration bases your benefit on your 35 highest-earning years, among other factors discussed on the next slide, so since you can't predict your future salary, you can't accurately predict your benefit, either. Plus, the program and the way it calculates benefits could change over time.

If you want to estimate your benefits based on the current benefit formula, you can create a my Social Security account. Here, you'll find a record of the income you paid Social Security benefits on for every year you've worked and an estimate of how much you'll get per month at various starting ages.

ALSO READ: 3 Great Reasons to Take Social Security Benefits at 62

The major factors affecting your Social Security checks are your income over your working life and the age you claim benefits at. The Social Security Administration calculates your average indexed monthly earnings (AIME) by totaling your income over your 35 highest-earning years, adjusted for inflation, and dividing it by 420 -- the number of months in 35 years.

Then, it plugs this into the current benefit formula to determine your benefit at your full retirement age (FRA), discussed on the next slide. If you claim benefits at a time other than your FRA, the Social Security Administration runs another calculation to determine how your benefits will grow or shrink.

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.

Your FRA is the age at which you become eligible for your scheduled benefit based on your work record. For those born between 1943 and 1954, it's 66. Then, it rises by two months every year thereafter until it reaches 67 for those born in 1960 or later.

Waiting to sign up for Social Security could potentially result in a larger lifetime benefit, depending on how long you live. Every month you delay benefits increases your checks slightly until you reach your maximum benefit at 70.

For someone with an FRA of 67, your checks increase by 5/12 of 1% per month from 62 to 64, then by 5/9 of 1% per month from 64 to 67, and finally by 2/3 of 1% per month from 67 to 70. If you delay benefits until 70, you receive 124% of the amount you would've gotten if you'd signed up at your FRA. For someone with an FRA of 66, you could get as much as 132% of your scheduled benefit amount by delaying benefits.

ALSO READ: The No. 1 Reason to Claim Social Security at Age 70

Claiming Social Security before your FRA reduces the size of your checks. If you sign up right away at 62, you'll only get 70% of your scheduled benefit per check if your FRA is 67 or 75% if your FRA is 66.

That could lead to a smaller lifetime benefit, but if you have a terminal illness or you need the funds to help you cover your expenses in retirement, it could be worth signing up early anyway.

This is a common misconception, but it's not true. If you sign up for Social Security early, you are permanently reducing the size of your checks. You may see small increases over time due to cost-of-living adjustments (COLAs) designed to help Social Security keep pace with inflation, but you won't see a substantial benefit bump at your FRA. There is one exception to this rule, discussed on the next slide.

There's no rule saying you can't claim Social Security while you're still working as long as you're at least 62. But doing so may not be the best choice for everyone. If you're under your FRA, your benefits are subject to the Social Security earnings test.

That means if you're under your FRA for all of 2021, the government will take $1 from your Social Security checks for every $2 you earn over $18,960. And if you'll reach your FRA in 2021, you'll lose $1 for every $3 you earn over $50,520 if you hit this amount before your birthday. But once you reach your FRA, the government recalculates your benefits to account for what it withheld, and your future checks will be larger.

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 can apply for Social Security benefits by submitting an application online, calling the Social Security Administration, or visiting a Social Security Administration office near you.

Note that due to the COVID-19 pandemic, office visits are currently by appointment only, so you should contact your local Social Security office before you show up.

ALSO READ: 3 Costly Social Security Mistakes People Make Long Before Claiming Benefits

Most people have their Social Security checks direct deposited to their bank account so they don't have to bother with depositing the funds themselves. But if you don't want to do this, you can also opt for a debit card instead.

The Social Security Administration will automatically deposit your funds onto the debit card each month, and you can use it to shop and make purchases just as you would with a traditional debit card.

You could owe federal taxes on your Social Security benefits if your provisional income -- adjusted gross income (AGI) plus nontaxable interest and half your annual Social Security benefit -- exceeds $25,000 for a single adult or $32,000 for a married couple.

Thirteen states also tax Social Security benefits, though West Virginia will soon end the practice. Each state has its own formula that determines who must pay taxes on their benefits and how much they owe. Check with your state government to find out how it handles this.

If it's been less than one year since you signed up for benefits, you can choose to suspend your benefits until a later date. But there's a catch: You must return all the money you've received from the program since you signed up. If you had family members claiming benefits on your work record as well, they must also return what they've received. That means you need their consent to do it.

If it's been longer than one year, you don't get a do-over. You just get what you get for benefits, though your checks may increase slightly over the years due to COLAs.

ALSO READ: Don't Claim Social Security Benefits Until You Can Answer These 3 Questions

It's a common concern, particularly among younger workers, but Social Security isn't going to disappear. At least not anytime soon. The program's trust funds are nearing depletion, and while there is some cause for concern, the trust funds aren't the only or even the most significant source of funding for the program.

Most of Social Security's funds come from the taxes that workers pay on their income every year. This tax will still exist even after the trust funds are wiped out, so Social Security will still be around. However, its buying power may be less in the future. That means you'll need plenty of your own retirement savings to cover what Social Security doesn't.

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.

If any of the information here was new to you, that's probably a sign you should rethink your plans for Social Security -- or come up with a plan if you hadn't thought about it before. Decide when you'd like to sign up for benefits and look for ways to increase your benefits right now, like pursuing promotions or working longer to increase your AIME.

Your plan for Social Security doesn't have to be set in stone, but by having some idea of what you plan to do for now, you can estimate how much you'll get and, by extension, how much you need to save for retirement on your own.

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