15 Things You Should Know About Social Security While You're Still Working

Social Security will likely become an important income source for you when you're older. But it's important to educate yourself on the program even when retirement is decades away. Here are a few essential points to keep in mind while you're still working.

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Because Medicare eligibility begins at age 65, many people assume that Social Security eligibility starts at the same time. But actually, you can sign up for benefits as early as age 62. Doing so will reduce the amount you receive, though -- for life.

You're entitled to your full monthly Social Security benefit once you reach full retirement age (FRA). But that age isn't universal. Rather, it depends on the year you were born, and it falls between 66 and 67.

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For each year you hold off on claiming Social Security past FRA, your benefits grow 8%. And that increase then remains in place for the rest of your life. This option runs out at age 70, though, so once that birthday arrives for you, there's no sense in delaying your filing any more.

The amount of money you're entitled to from Social Security will hinge on your lifetime wages. That means the program doesn't pay a universal benefit but rather calculates benefits individually. The more you're able to earn, the higher a benefit you might look forward to.

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In the course of calculating benefits, Social Security takes your 35 most profitable years of earnings into account. If you don't work a full 35 years, you'll have a $0 factored in for each year you're missing an income. If you're nearing the end of your career without a full 35 years of employment, it could pay to push yourself to work longer.

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When calculating individual benefits, Social Security adjusts earlier wages for inflation. That's a necessary thing, as it helps ensure that benefits reflect the general rise in living costs that impacts all workers. Social Security also takes inflation into account when calculating yearly raises.

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Social Security doesn't pay retirement benefits to everyone. You have to earn 40 work credits in your lifetime to be eligible. That may be hard to do if you only work on a very part-time basis, but if you work full-time for many years, it's very doable.

You have to work in some capacity for at least 10 years to be eligible for Social Security. That's because the maximum number of credits you an earn in a single year is four. You can't simply accumulate most or all of your credits by working full-time for a couple of years.

The value of a work credit can change from one year to another. Last year, a single work credit was worth $1,470 in earnings. This year, it takes $1,510 in earnings to earn one work credit.

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It's not only salaried wages that count toward Social Security eligibility. If you work a second job, those wages count as well. This holds true even if you're paid on a freelance basis. But you'll need to report that income to have it count (and also, to not get in trouble with the IRS).

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Each year, there's a wage cap put in place for Social Security tax and benefit calculation purposes. Last year, the wage cap was $142,800. This year, it's $147,000. Earnings beyond that point don't count toward a higher future benefit.

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The Social Security tax rate is 12.4% of income, up to the annual wage cap. Salaried workers pay 6.2% of that tax while their employers pay the rest. Those who are self-employed, however, must cover the entire 12.4%.

You're allowed to collect a paycheck from a job and Social Security benefits. But if your earnings exceed a certain threshold, you'll risk having some benefits withheld. This year, that threshold is $19,560 (unless you'll be reaching FRA this year, in which case it's $51,960).

ALSO READ: Here Are the 2022 Social Security Earnings-Test Limits

Once you reach FRA, you can work and earn any amount without it affecting your benefits. The aforementioned earnings limits won’t apply. If you’re still working, even on a partial basis, it could really pay to wait until FRA to file your Social Security claim.

Each year, the Social Security Administration (SSA) will issue an earnings statement summarizing your wages. It's important to check that statement for errors, since underreported income could result in a lower monthly benefit down the line. You can access your statement on the SSA's website, and if you're 60 or older, it should come in the mail every year.

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The more you read up on Social Security, the better prepared you'll be to maximize your benefits. There are certain moves it pays to make during your working years to snag higher payments down the line, so take some time to learn what those are. Your future self will thank you for it.

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