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15 Social Security Facts You Should Know Ahead of Retirement

By Maurie Backman - Jul 24, 2022 at 8:00AM
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15 Social Security Facts You Should Know Ahead of Retirement

The more you know about Social Security, the better

Once you retire, you may end up being pretty reliant on Social Security to cover your living costs. So the more you know about the program ahead of time, the better a position you might land in to make the most of it. Here are 15 essential Social Security facts to keep in mind.

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1. Your benefits are based on your personal earnings

It's a myth that Social Security pays seniors the same universal benefit. Rather, your benefit will hinge on how much you earned during your 35 highest-paid years in the workforce.

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2. You need to earn a certain number of credits to qualify for benefits

It takes 40 work credits to qualify for Social Security benefits based on your own earnings history. The value of a credit changes every year, and you can only earn a maximum of four credits per year.

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3. Your benefits aren't meant to replace your income in full

The income you receive from Social Security isn't meant to take the place of your pre-retirement income. If you're an average earner, you can expect your monthly benefit to replace 40% of your former wages. That may not be enough to live on.

ALSO READ: Retiring on Social Security Alone? Plan to Do This.

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4. The average monthly benefit is $1,661

The typical senior on Social Security today collects $1,661 a month. But there are steps you can take to snag a higher monthly benefit.

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5. The maximum monthly benefit is $4,194

The maximum amount Social Security will pay out on a monthly basis this year is $4,194. Snagging that maximum benefit, however, is a difficult thing to do, so you shouldn't necessarily bank on that high a payday.

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6. Your filing age will determine what benefit you get

It's not just your wages that determine what Social Security benefit you receive in retirement. Once that base amount is determined, your filing age will dictate whether you're entitled to that exact sum, more, or less.

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7. The earliest age to claim Social Security is 62

The soonest you can sign up for Social Security is age 62. But filing at that age will result in a reduced benefit -- for life.

ALSO READ: Claiming Social Security at 62 Will Cut Your Benefit Checks -- but That Might Not Be a Problem

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8. You'll need to wait until full retirement age to get your complete benefit

You're entitled to your full monthly Social Security benefit based on your wage history once your full retirement age arrives. That age hinges on your year of birth, but it's either 66, 67, or 66 and a certain number of months.

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9. You can boost your monthly benefit by delaying your filing

If you hold off on claiming Social Security past full retirement age, you can boost your monthly benefit by 8% a year. It's worth going this route if you don't have much retirement savings to fall back on.

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10. Your benefit won't grow past age 70

You can claim Social Security at any age once you turn 62. But there's no sense in delaying your filing beyond the age of 70. Once you turn 70, you can no longer accrue credits for holding off on benefits.

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11. You can work and claim benefits at the same time

You're allowed to earn income from a job and collect Social Security simultaneously. But if you do so before reaching full retirement age, you'll risk having some benefits withheld if you earn too much.

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12. Your benefits could rise each year

Social Security benefits are eligible for an annual cost-of-living adjustment, or COLA. That COLA is based on inflation, and it's generally announced in October.

ALSO READ: Social Security Benefits Could Rise 10.5% Next Year

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13. Your benefits may be taxable

You may end up paying federal taxes on some of your Social Security benefits during retirement, depending on what your total income looks like. Also, some states tax Social Security, so you may face that extra burden depending on where you settle down.

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14. You can collect benefits even if you never worked

If you don't have enough work credits to qualify for Social Security, you may be eligible for a spousal benefit if you are or were married to someone who's eligible for benefits. Your spousal benefit's maximum value is 50% of what your current or former spouse collects.

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15. Benefit cuts are a distinct possibility

Social Security is facing financial challenges that could come to a head in the coming years. Benefit cuts are therefore on the table as early as 2035.

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Know your facts

Social Security may end up being a crucial source of income for you in retirement, so it's important to have a solid grasp of how the program works. The more you educate yourself, the stronger a position you'll be in to benefit from Social Security once you're ready to leave the workforce behind.

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