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Understanding Social Security Benefits

July 23, 2020

Understanding social security benefits is vital for planning for retirement. However, many people find the topic complex and confusing. It doesn’t have to be this way. You should have everything you need to feel confident in taking advantage of social security benefits in your retirement planning.

Here are the 5 most common questions we get about social security retirement benefits.

Who is eligible for Social Security retirement benefits?

You need 40 “work credits” to qualify for retirement benefits. Think of work credits as a calendar quarter of work. 40 calendar quarters, or 40 work credits, would be ten years of work.

The number of credits does not affect the amount of benefits you receive. It only determines if you are eligible or not.

The amount you must earn to get a credit has changed over the years. In 2020, you need to earn $5,640 for the whole year to earn the maximum of four credits for the year. In 1978, you had to earn $200 to get four credits.

Spouses may be eligible for benefits even if they have never worked or if you are divorced (if the marriage lasted ten years or longer). Children are also eligible for benefits if they meet certain criteria.

How is my retirement benefit amount determined?

Two primary factors determine your benefit. The amount you earned during your lifetime (lifetime earnings) and the age at which you decide to retire and draw benefits.

Your benefit is based on the average of your highest 35 years of earnings.  If you work less than 35 years, the Social Security Administration will use a zero for each year without earnings.

At what age CAN I claim Social Security?

The age at which you start taking benefits can have a significant effect on the amount your lifetime benefit. There are three situations to understand:

  1. Full retirement age– the date at which you can start to receive your full retirement benefit. This is between ages 66 and 67, depending on when you were born. Full retirement age is often referred to as your “FRA”.

  2. Early retirement age– starts at age 62 and goes until you reach full retirement age. Start in this window and your benefits are substantially and permanently reduced.

  3. Delayed retirement age– starts any time after full retirement age up until age 70. If you delay retirement benefits until after your full retirement age, your benefit increases 8% per year.

At what age SHOULD I claim Social Security?

This is easy to answer if you know exactly how long you will live. That’s what makes it so tricky.

According to data from the Social Security Administration, a woman turning 65 today can expect to live to almost 87 (84 for men). For a couple who are age 65 today, there is a 50 percent chance that one person will survive to at least age 92, according to the Society of Actuaries.

If you can afford to delay claiming, carefully consider the benefits of delaying and the costs of claiming early. Make sure you plan not only for your lifetime but your spouse’s as well. And most importantly, try not to focus on what happens by delaying filing and dying early. Instead, focus on the possibility you and your spouse might live a long time and ensure you have the right strategy in place.

Just remember, the age at which you start drawing your monthly benefit sets in stone the amount you will receive for the rest of life. This makes how long you are going to live a huge factor in calculating your lifetime benefit.

Will Social Security still be there when I retire?

Let’s start with how Social Security is funded. Employers and employees each pay 6.2% of wages, up to an annual limit, to fund the program. These taxes and other income are deposited into the Old-Age and Survivors Insurance (OASI) Trust Fund and benefits are paid from the trust.

More workers and fewer beneficiaries help make the program more financially stable. According to the Social Security Administration, there were 16.5 workers for every Social Security recipient in 1950, but only 2.8 workers per recipient in 2013.

Because of this imbalance, the OASI Trust Fund now pays out more than it brings in. According to the 2019 Annual Report to the Social Security Board of Trustees, the OASI Trust Fund will be out of money in 2034 if no changes are made to the program.

This does not mean the program will be bankrupt and unable to pay any benefits, but it does mean the program would only be able to pay based on the amount of taxes and income received in any given year. For planning purposes, it is probably smart to assume that you will only receive 70% of your scheduled future payments after 2034.

Get Your Fair Share

Getting sound advice on the ideal Social Security filing strategy can mean a significant difference financially.

This is best accomplished with optimization software to analyze your scenarios, compare options, and determine your ideal filing age.

Make sure you get the maximum benefit based on your situation. This will allow you to rely less on your investments to keep up with spending needs and will help you make sure you are getting your fair share.

To speak with someone about your unique financial situation, click here to schedule a call or call (315) 472-7045.


  1. […] you want to learn more about Social Security planning, I shared the 5 Most Common Questions About Social Security Retirement Benefits in a previous blog […]

  2. Dick Campbell on July 27, 2020 at 8:20 pm

    Great job, Chris! You certainly present a lot of info in a manner that people can understand. There are so many variables that affect people’s choices as to when they begin taking their Social Security payments. I would think that people might enjoy you going into more depth in future articles.
    For example, my wife and I are very close in age. However, she took 13 years off from work to raise our children and made considerably less money than I when she returned. Hence, we decided that she would begin her Social Security at the age of 62 and I would delay my Social Security for several years. The value of my potential payout rose 8% for each year that I delayed collecting. Her Social Security payouts were destined to be fairly low, so our thought was that if she died before me, we at least took advantage of her benefits for a while. If she outlived me, she would stop her lower Social Security Payments and then collect my share of Social Security which was much higher than hers. So, by delaying my payment, the only way we could lose was if both of us died early. If that happened, it would not matter, but the risk/reward was quite obvious for both of us. As it turns out, we are both still collecting Social Security and we are much better off than if we both started payments at the age of 62.
    There might be a totally different scenario if there is a large age difference in a couple, or if couples the same age both have similar numbers that determine Social Security benefits.
    People need to start looking at things many years before they are eligible to collect Social Security. Once a decision is made, it can not be changed!

  3. Laura Horian on August 3, 2020 at 5:38 pm

    Chris– This is great! Just what I need at this time in my life. Like your book, the presentation of content is fully understandable and applicable. Reading the above comment from Dick is also informative as it further demonstrates the kinds of variables involved in making an informed decision on when to take our government egg. Of course the more I learn, the less obvious my options become. There’s always an element of gambling in finances. In this case: Do I take it now while it’s still adequately resourced even if it’s less than what I could get if I wait, when it may not be there? We count on Social Security as a sure thing in a world of uncertainty, but it’s not. At 63, with a husband 5 years younger, we will continue to play if/then scenarios in our heads with respect to future finances until something feels right.

    • Chris Gardner on August 3, 2020 at 5:52 pm

      The best thing to do is run scenarios through an optimizer. I stand ready 🙂

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