15 Social Security Facts to Help You Plan for Retirement

When you're making your retirement plans, it's inevitable that Social Security will play a role in them. But you need to understand the full truth about these benefits, how you earn them, and how much income they'll provide you.

To make sure you don't get off course in your efforts at.a secure retirement, here are 15 Social Security facts you absolutely need to know.

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In order to be eligible for Social Security retirement benefits, you need to have earned at least 40 work credits.

You can earn a maximum of four per year, so you must have at least a 10-year work history to receive retirement income from the Social Security Administration based on your own career record.

Social Security benefits are not designed to provide 100% of the income you need as a retiree. Most experts recommend being able to replace at least 70% of your pre-retirement income, and many seniors need more than that.

Your Social Security benefits will replace just 40% of pre-retirement earnings. You'll need to have supplementary savings to provide the other money you need to enjoy life in your later years.

In 2021, the average Social Security benefit for retirees comes in at just $1,543 per month.

If you're relying solely on Social Security and your benefits are around the average, your total annual income would come in at just $18,516. For most seniors, that's not going to be enough -- especially when factoring in how much healthcare can cost in retirement.

ALSO READ: Americans Are Dangerously Underestimating Healthcare Costs in Retirement, a Study Indicates

Social Security's trust fund is in serious financial trouble. It's projected to run dry in 2035 (or earlier) without action on the part of lawmakers.

If the trust fund runs short, Social Security will still be able to pay benefits out of payroll taxes being collected. Unfortunately, these can't fund all the promised payments, and seniors will be looking at around a 24% benefit cut.

While such a large reduction in benefits probably won't happen, it's possible that actions lawmakers take will result in you receiving less money than expected. You need to take that risk into account when making retirement plans.

You can start Social Security benefits at age 62, but if you want your standard benefit, you'll need to wait several years longer until your full retirement age (FRA).

FRA is between 66 and 2 months and 67, depending on birth year. You need to know your FRA so you can decide when claiming benefits makes sense for you financially.

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.

When you start Social Security checks ahead of your full retirement age, benefits are reduced by a small amount for every single month. This happens due to early filing penalties.

Early filing penalties can add up, with those who claim Social Security at 62 facing a 30% cut to benefits if their full retirement age was 67.

Planning to retire early could mean accepting much smaller Social Security checks if you'll need to start your benefits in order to leave the workforce.

Maxing out your Social Security checks can provide more financial security later in life since these benefits are guaranteed to last for life. But to get the maximum monthly check, you'll actually need to wait until 70 to claim benefits.

That's because delayed retirement credits that boost your monthly pay become available for each month you wait after FRA (but only until age 70).

If you want the largest possible check, you'll either need to work much longer than average or need money to fund retirement prior to claiming your Social Security at 70.

ALSO READ: Sorry to Say: You Probably Shouldn't Claim Social Security at 62

Your Social Security benefit amount will be determined by both your age when you claim benefits and your earning history.

Specifically, your standard benefit equals a percentage of average wages in the 35 years your earnings were the highest.

Those who don't have a 35-year work history are still subject to the same calculation. They just have some years of $0 wages included in it, which results in a lower benefit amount.

Planning to work for 35 years (or more, if you earn more money later in life) is key to getting the highest possible monthly checks.

If you're anticipating that you'll be able to keep your entire Social Security benefit, it will probably come as a surprise that you may lose some of it to taxes. In fact, as many as half of all retirees owe federal taxes on Social Security checks. And some states collect taxes on benefits as well.

Whether you're taxed depends on how high your provisional income is. That's half your Social Security checks plus all taxable income and some nontaxable income. The thresholds at which benefits become taxable isn't adjusted based on inflation, either, so a growing number of retirees are going to face a tax bill.

You need to be prepared for that when estimating the amount of income you'll have as a senior.

ALSO READ: Want to Avoid Paying Taxes on Social Security? Here's How

If you aren't eligible for Social Security benefits based on your own work history, it's possible to qualify based on the work record of a spouse.

Spousal benefits could equal up to 50% of your husband or wife's full benefit -- but you can't claim them until your spouse has claimed his or her benefits.

That's why coordination with your spouse is essential when deciding when you should both get benefits.

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 you are claiming benefits on a spouse's work history, there's no benefit to waiting until age 70 to start getting checks.

Since you can't earn delayed retirement credits on spousal benefits, there's no reason to put off starting your benefits once you've reached your full retirement age.

If you're the higher earner in your household, starting your benefit checks prior to your full retirement age won't just reduce your Social Security income. Survivor benefits could be impacted as well.

The death of a spouse is a huge financial shock for retirees. While the last surviving spouse gets to keep the higher of the two benefits either partner was receiving, this could still mean a huge reduction in annual income.

If you've shrunken your widow's survivor's benefits by claiming your checks early, you'll only exacerbate the financial damage resulting from your death.

Divorce doesn't mean giving up your chance at spousal or survivor benefits. As long as your marriage lasted at least 10 years, you should still be entitled to claim Social Security on your spouse's work history.

Understanding the rules for eligibility for these benefits can be important both for timing your divorce if you're close to the 10-year mark and for determining the amount of income Social Security can produce for you.

If you claim Social Security prior to full retirement age and continue to earn a paycheck, Social Security checks could shrink once your earnings hit a certain threshold.

The rules for how much you can earn before benefits are affected can change annually. But you need to know that you may not be able to get both your full benefit and earnings from work when you're determining how you'll support yourself as a retiree.

ALSO READ: Your Guide to Working While on Social Security

While retirees receive cost-of-living adjustments (COLAs) in some years, those haven't kept pace with the inflation seniors face. That's because the measure used to determine COLAs underestimates the amount seniors spend on healthcare and housing.

Unfortunately, the result of this is that Social Security benefits have lost about 30% of their buying power over two decades. There's no sign this trend will change, and it could get worse, so it's becoming more important than ever not to be overly reliant on Social Security checks.

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.

Armed with knowledge about these 15 Social Security facts, you can make a more informed choice about the income benefits will provide -- and about when you can expect to start your Social Security checks.

This is crucial to making a successful retirement plan that gives you the money you need in your later years.

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