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3: Analyze Your Decisions

Factors That Increase or reduce Social Security Benefits

Three primary factors influence how much you receive monthly as your Social Security benefit:

social security card

  1. The number of years that you worked and paid into Social Security.
    Every year you work, your earnings are recorded in the Social Security system. If you have gaps in employment due to illness, unemployment, caregiving duties or working but not paying into Social Security, your benefit amount will be lower than it would be otherwise.
  2. Your earnings during the years you paid into Social Security.
    To qualify for Social Security benefits, you have to pay into Social Security and earn 40 credits for 10 years of work. The amount of your monthly benefit is based on your lifetime earnings. The 35 highest documented earning years are taken into consideration. There is a direct correlation between higher earnings and higher monthly benefits; therefore, boosting your earnings with secondary employment may be of benefit.
  3. When you decide to start receiving your benefits.
    If you opt into your monthly benefits at an earlier age than your FRA, your benefit amount will be reduced, and you will receive lower monthly payments over your lifetime. If you can take your benefits after FRA, you will receive larger monthly payments. In fact, taking your benefit at age 70 rather than 62 guarantees a 76 percent return in your benefit amount, something that most investments cannot match.

Create a Social Security Account

Create a my Social Security account to review your Social Security statement showing:

  • Estimates of future retirement, disability and survivor benefits
  • Earnings that have been recorded by the Social Security Administration
  • Estimated Social Security and Medicare taxes that you’ve paid

If you notice any errors with your recorded information, use the Request for Correction of Earnings Record to make updates.

Special Situations to Consider

Deciding when to take your Social Security benefits is important. Your timing will depend on your values, your vision for your retirement lifestyle, and your particular life circumstances. Consider the following life situations and their impact:

Your Employment
Will you take benefits early but continue to work? If so, your benefits may be reduced. Conversely, if you work until FRA and continue to work, then you can also receive your full benefit.

Your Tax Liability
The Social Security Administration reports that approximately 40 percent of people who take monthly benefits have to pay income taxes on them. Depending on your income and tax bracket, up to 85 percent of your benefit is taxable.

Your Health
Poor health for you or a family member may mean that you have to take Social Security benefits earlier than you planned. Alternatively, your family history and good health can mean that your retirement will last longer than you planned. Knowing your life expectancy will help you make a decision about when to take your benefits to get the maximum amount when you need it.

Your Marital Status
Whether you are divorced or married will impact when you take your benefits.

  • If you are divorced, but were married 10 or more years and have not remarried, you are eligible to receive half of your ex-spouse’s full benefit. This allows you to take your spouse’s benefits earlier and postpone your own.
  • If you are married, the spouse with lower earnings can take benefits earlier thereby delaying the higher earner’s benefits until FRA or later.

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