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What is Social Security? Eligibility, benefits, and retirement age explained

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Social Security benefits provide financial stability to retirees, people with disabilities, and survivors. Here's how to earn the maximum Social Security benefit in 2024. Milan Markovic/Getty Images

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  • Social Security is a federal program that provides retirement income and disability benefits.
  • Social Security is funded by payroll taxes and is one of the largest areas of US federal spending. 
  • Delaying collection of Social Security retirement benefits can bring a significant financial bonus.

Social Security is a government program funded by working people that pays retirees and disabled workers. It started during the Great Depression in the 1930s and is now a major source of income for many.

Although Social Security can be a big help for retirees and people with disabilities, it generally doesn't provide enough as a sole source of income. Therefore, retirement experts generally recommend contributing to one or multiple of the best retirement plans (including an IRA and 401k). 

Here's everything you need to know about receiving Social Security benefits in 2024. 

Understanding Social Security

Definition and purpose of Social Security

Social Security is a vital U.S. government program providing financial support for retirees, people with disabilities, and survivors of deceased family members. How much you've paid into the program determines how much you'll receive later.

"To better understand Social Security, it may be helpful to know that the official name is the Old Age, Survivors, and Disability Insurance (OASDI) program," says Jay Zigmont, CFP and founder of Childfree Wealth. "While OASDI may not be as catchy of a term as Social Security, it does explain the program."

History and evolution of the Social Security program

The Civil War Pension program was the first unofficial Social Security program in the U.S. Starting in 1862, it began providing benefits to disabled veterans and survivors of deceased breadwinners directly affected by the war. In 1906, old age became another qualifier for this program.

The Social Security program, as we know it today, was started in 1935 by President Franklin D. Roosevelt in response to the economic struggles of the Great Depression. The Social Security Board was also formed during this time. Taxes began being collected in 1937, creating the Special Trust Fund. However, monthly payments did not begin until 1940. 

President Eisenhower added a disability insurance program in 1954, but a cash benefit wasn't included until 1956. The Supplemental Security Income Program (SSI) was introduced in the 1970s. Since then, the Social Security program has undergone various reforms. Some of the most notable forms occurred during the Bush Administration (2001-2008) and the Obama Administration (2009-2017). 

How Social Security is funded

Social Security is funded through federal payroll taxes. If you collect a paycheck, your employer will withhold a portion of your earnings for Social Security. If you're self-employed, you'll pay these taxes yourself.

Throughout your career, you'll contribute a substantial portion of your income to the Social Security program. All that money is pooled together to support what has become a vast program that retirees, workers with disabilities, and their survivors rely on for economic security. 

In 2024, the Social Security tax rate is the same as in 2023: 6.2% for the employee, with an equal match by the employer, for a total of 12.4% applied to the first $168,600 of earnings. 

Types of Social Security benefits: retirement, disability, survivors

While it's mostly associated with retirement, Social Security also provides disability and survivor's benefits. All these programs are run by the Social Security Administration (SSA).

Social Security retirement benefits

Social Security retirement benefits are monthly checks that supplement income for retirees. Regardless of how much you earn or when you retire, you should never rely on Social Security as your sole source of income in retirement. It almost certainly will not be enough.

Be sure to include others, such as a 401(k) or IRA, in planning for your life after work. Many financial professionals recommend that you aim to have between 70% and 80% of your pre-retirement income each year in retirement.

Social Security disability benefits

Disability benefits are for individuals who are unable to work due to a chronic physical or mental condition. There are two different programs for disability benefits: 

  • Social Security Disability Insurance (SSDI): This program benefits you and certain family members if you are "insured," meaning you worked long (or recently) enough and paid Social Security taxes on your earnings. 
  • Supplemental Security Income (SSI): This program pays benefits to adults and children with disabilities who have limited income and resources.

Remember, this is not a short-term disability program like workers' compensation, insurance, or a savings account.

For every $1 that goes toward Social Security, $0.85 goes to a trust fund that pays the monthly benefits to everyone who currently files for Social Security. The other $0.15 goes to a trust fund that pays benefits to people with disabilities and their families. 

Social Security survivors' benefits

Under certain conditions, your family can receive Social Security benefits based on your years of work after you die. If you find yourself in a survivor's situation, you can use the Social Security program to help offset lost income due to your family member passing away.

Survivors' payments are based on a percentage of the deceased family member's basic Social Security benefit, which usually ranges from 75% to 100%.

Eligibility for Social Security Benefits

How to qualify for Social Security retirement benefits

To be eligible for Social Security retirement benefits, you must meet the following criteria: 

  • At least 62 years old
  • Worked and paid Social Security taxes for at least 10 years 
  • Earn at least 40 Social Security credits

You earn "credits" each year you work and pay Social Security tax. The maximum number of credits you can earn each year is four. Forty credits equals around 10 years of work.

In 2024, you earn one credit for every $1,730 in covered earnings each year. To earn four credits in a year, you must earn at least $6,920. 

How to qualify for Social Security disability benefits

To qualify for Social Security disability benefits, you must meet criteria including:

  • You are unable to work in the future because of your medical condition.
  • You cannot do the work you did previously or adjust to other work due to a recent diagnosis of a medical condition.
  • Your condition has lasted at least a year or will result in your death.

How to qualify for Social Security survivor benefits

For surviving spouses, the criteria to receive payments is:

  • Age 60 or older
  • Age 50 or older with a qualifying disability 
  • Any age if caring for a child who is younger than 16 or has a qualifying disability 

For your children to receive Social Security benefits, the criteria include the following:

  • Unmarried
  • Younger than 18 years old
  • Between 18 and 19 years old, but in a secondary school as a full-time student
  • Age 18 or older with a qualifying disability

Social Security age requirements

Early retirement age

You can start receiving Social Security retirement benefits as early as 62, but you won't be able to access your full benefits until you reach the full retirement age (see the chart below). Age 62 is considered an "early retirement," and your benefits will be reduced by nearly 30% until you reach full retirement age. 

The maximum Social Security benefit you can earn at 62 is $2,710 monthly in 2024.

Full retirement age (FRA)

Full retirement age refers to the age at which you can receive full Social Security retirement benefits. However, the full retirement age isn't the same for everyone, as it varies by birth year.

For example, the full retirement age is 67 for folks born in the 1960s or later. However, those born between 1943 and 1959 can reach full retirement age between 66 and 67. 

Birth yearRetirement age
1943-195466
195566 and 2 months
195666 and 4 months
195766 and 6 months
195866 and 8 months
195966 and 10 months
1960 or later67

In 2024, the maximum benefit you can receive at full retirement age is $3,822. If you retire at age 70, you can earn the maximum benefit of $4,873. 

Delayed retirement credits

Each month you delay starting Social Security benefits after you reach full retirement age (67), your benefits increase by 1%. Your benefits can increase by 5.5% to 8% each year, depending on your birth year. Benefits stop growing once you reach age 70. 

Birth yearMonthly rate of increase12-month rate of increase
1933-19341%5.5%
1935-19361%6%
1937-19381%6.5%
1939-19401%7%
1941-19421%7.5%
1943 or later1%8%

How much can I earn while on Social Security?

Earnings limits for early retirement

Those at least 62 but not at full retirement age have an earning limit of $22,320 in 2024. Early retirees are entitled to $800 a month on Social Security benefits for $9,600 annually. If you make more than that, your benefits will be reduced by $1 for every $2 you earn over $22,320.

For example, someone with an annual working income of $35,000 will have their benefits reduced by $6,340. The total benefit they will receive for the year is $3,260, which is approximately $271 per month. 

Earnings limits for full retirement age

The earning limit for folks who reached full retirement age in 2024 is $59,520. This may allow some individuals to pocket more cash without reducing their benefits. Individuals at full retirement age are entitled to $800 per month in benefits. 

If you are 67 or older and making more than $59,520, your benefits will be reduced by $1 for every $3 earned over the limit. But soon, this rule will no longer be in effect. Starting in August 2024, individuals at full retirement age can receive full monthly benefits regardless of income. 

A worker's earnings impact Social Security benefits. Additional work payments like commissions, bonuses, and vacation pay are included in your earnings. Social Security does not consider pensions, investment income, interest, annuities, veteran benefits, or other government or military retirement benefits as part of your earnings.

Calculating your Social Security benefits

How benefits are calculated

Your Social Security benefits are calculated based on how much you earned in your lifetime. Your actual earnings are adjusted (or indexed) to account for wage changes since the time you received them.

Your average indexed monthly earnings are then calculated for the 35 years you earned the most. A formula is applied to that figure to determine your basic benefit, known as the primary insurance amount (PIA). That's how much you would receive at your full retirement age.

The SSA provides detailed information about how much you've paid into the program and estimates of how much you'll receive in benefits depending on the age at which you retire. You can get one by creating an online account with the agency, or you can request one by mail.

Factors that affect your benefit amount

Factors that affect how much you receive in Social Security include: 

  • Birth year
  • Work history
  • Earning history
  • Age when claiming Social Security
  • If you have a spouse who worked
  • Inflation

Economic conditions, such as inflation, can impact Social Security benefits. For example, Social Security and Supplemental Security Income (SSI) benefits increase by 3.2% to offset the rising cost of living in 2024. For retirees, this means an average increase of more than $50 per month. 

Maximizing your Social Security benefits

When to start taking Social Security

Choosing when to start receiving your retirement benefits is a very important decision.

"For most people, it is best to wait until 70 to receive Social Security benefits, but there are quite a few considerations," Zigmont says. "When to take your benefits is part of your financial plan that will change the course of your retirement for life."

While you can start receiving your Social Security retirement benefits as early as age 62, you aren't entitled to full benefits until you reach your full retirement age. Starting to receive Social Security benefits later rather than sooner can be financially beneficial.

According to the SSA, someone who starts at age 70 will get 132% of what they would have gotten as soon as they reached their full retirement age because they delayed getting them for 48 months. Meanwhile, a worker who chooses to collect at age 62 may see a reduction of as much as 30%.

Coordinating benefits with your spouse

Spousal benefits are Social Security benefits you can collect based on your spouse's earning history rather than your own. You can opt-in to receive spousal benefits if you have no working income or your spouse's income exceeds yours. But you can't collect your own Social Security and spousal benefits, only one or the other. 

How much you'll receive in benefits varies by age but can range from 32.5% to 50% of your spouse's benefit. 

For example, if your spouse at full retirement age receives the maximum benefit of $3,822 in 2024, you can receive up to $1,911 monthly benefits. Collecting spousal benefits does not affect your partner's ability to collect Social Security.

To qualify for spousal benefits, your spouse must be collecting retirement benefits. You must also be 62 and have been married for at least a year.

Social Security and taxes

Taxation of Social Security benefits

Social Security benefits are taxed for people with an income over the annual limit, which is $25,000 for individuals or $32,000 for married couples filing jointly. How much your benefits are taxed depends on your income:

  • Up to 50% of the benefits of individuals with incomes between $25,000 and $35,000 (or married couples with incomes between $32,000 and $44,000) will be taxed.
  • Up to 85% of the benefits of individuals with incomes of more than $34,000 (or more than $44,000 for married couples) will be taxed. 

The best way to minimize taxes on Social Security benefits is to ensure your total combined income is less than the annual income limit. If you're making more than the yearly limit, consider delaying taking Social Security benefits until you're at least at full retirement age.

Reporting Social Security income

You can report the taxable portion of your Social Security income on Form 1040 or 1040-SR on line 6b of your income tax return. Also, your Social Security Statement should report your annual Social Security income on Form SSA-1099 in Box 5.

FAQs

What is Social Security? Chevron icon It indicates an expandable section or menu, or sometimes previous / next navigation options.

Social Security is a federally funded U.S. program that provides financial assistance and supplemental income to retirees, disabled individuals, and survivors of deceased workers. It is funded through payroll taxes collected from workers and employers. You can start receiving reduced Social Security retirement benefits beginning at age 62.

What is the full retirement age for Social Security? Chevron icon It indicates an expandable section or menu, or sometimes previous / next navigation options.

The full retirement age (FRA) varies depending on your birth year. For those born between 1943 and 1954, the full retirement age is 66. It gradually increases to 67 for those born in 1960 or later.

How much can I earn while on Social Security? Chevron icon It indicates an expandable section or menu, or sometimes previous / next navigation options.

How much you can earn while on Social Security varies by age. If you are below your full retirement age, there is a limit to how much you can earn without affecting your benefits. For 2024, the limit is $22,320. Once you reach full retirement age, there are no earnings limits.

Can I work while receiving Social Security benefits? Chevron icon It indicates an expandable section or menu, or sometimes previous / next navigation options.

 Yes, you can work while receiving Social Security benefits. However, your benefits may be reduced based on your earnings if you have not reached full retirement age. In 2024, the annual income limit for individuals below full retirement age is $22,320. Your benefits will be reduced if you exceed this limit. 

How are Social Security benefits calculated? Chevron icon It indicates an expandable section or menu, or sometimes previous / next navigation options.

Social Security benefits are calculated based on your average indexed monthly earnings during your 35 highest-earning years. Factors such as your age at retirement, lifetime earnings, and birth year can affect your benefit amount.

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