Social Security Facts
Millions of people will receive Social Security benefits this year, but many are unsure on how it all works. Here are a few things you should know.
Contributions aren’t saved away into a special account. Social Security contributions made now are used to pay current beneficiaries.
Social Security was designed to be a supplement to your retirement income. You shouldn’t count on it to be your sole source of income. The maximum monthly benefit in 2020 is $3,011 but the average monthly benefit for retirees is about $1,400 per month.
Social security benefits are not entitlements. You need to earn a minimum of lifetime work credits to qualify. The Social Security Administration factors in your 35 highest-earning, inflation-adjusted years when calculating your payment. To earn maximum payout, you would need to work at least that number of years in a decent-paying job.
You can start receiving full Social Security benefits when you reach full retirement age. This age depends on your birth year and currently ranges from age 65 to 67. You are eligible to start receiving reduced retirement benefits at age 62, but your benefits will be reduced by as much as 25%. If you wait to claim your benefit until after your full retirement age, your benefits will be increased by 8% per year until age 70. Claiming at age 70 instead of 62 will result in a higher monthly benefit payment. However, claiming early means you potentially receive your benefits over a longer time period.
If you receive income other than Social Security, such as wages or dividends, Social Security benefits can be taxable up to 85%, depending on your total combined income.
For more information about Social Security, visit the Social Security Administration’s website.