Social Security benefits could become a main source of income once you retire. It is important to understand how these benefits work, figure out the best time to file, and know how much you’ll receive on a monthly basis.
Who qualifies for Social Security benefits?
Qualification is based on a credit system. You need to earn a total of 40 credits during your life. You can earn up to 4 credits a year and one credit is awarded every time you meet a certain earning requirement. This amount varies from one year to the next. You will become eligible for Social Security benefits if you met earning requirements for a total of 10 years.
How are benefits calculated?
Only the 35 years during which you earned the most are considered. An average is then calculated to figure out what a typical income was during these 35 years. An index is used to adjust this income to account for inflation.
If you wait until full retirement age to file for benefits, you’ll receive the full amount of your benefits based on these 35 years.
What is full retirement age?
Your full retirement age depends on your birth date. For those born from 1943 to 1954, the full retirement age is 66. The full retirement age creeps upward until those born in 1960 or later can receive full benefits at age 67.
It’s important to note your full retirement age, since waiting only a couple of months before you file for benefits could make a difference in how much you receive.
Can you get benefits before you reach full retirement age?
You can start collecting your Social Security benefits once you reach the age of 62, but you will only get a portion of what your benefits would be if you waited until you reached age 66 or 67.
If you decide to file early, your payments from Social Security are reduced a bit for each year before your full retirement age.
Can you delay receiving benefits?
You can choose when you start receiving Social Security benefits. Your benefits will continue to increase past your full retirement age if you do not file right away. They will increase by 8% for each year that you wait.
How can you file for Social Security benefits?
All you have to do is visit the official Social Security website at ssa.gov and create an account. The filing process is pretty straightforward, but it is recommended to start the application process at least three months in advance.
You’ll probably have to upload some documents such as your tax returns, marriage certificate, and birth certificate. Preparing all these documents in advance will definitely speed up the approval process.
Can you find out how much your benefits will be in advance?
You can create an account on ssa.gov even if you don’t plan on applying for benefits at the moment. This will give you access to helpful information such as the amount of your benefits.
In the end, the benefits you’ll receive depend on how much money you earned during your life, when you file for benefits, and how long you live.
For an average life expectancy, you’ll end up receiving about the same total benefits regardless of when you file. You can receive less money for a longer period of time, or more money for a shorter period of time. You get to decide which works best for you.