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What Should I Expect From Social Security?

For many Americans, Social Security is at the center of their retirement plan. As such, the need for Social Security grows with an ever-expanding population reaching retirement age and many are asking questions about the subject.

Key Takeaways

  • You can begin taking reduced benefits as early as age 62, but cannot receive full benefits until you're "full retirement age."
  • Your benefit is calculated based off your highest-earning 35 years.
  • Your benefit increases 8% every year you delay receiving benefits (up until age 70).

Your big question might be a simple one: How much Social Security will I get? To learn that and more, check out the answers to some frequently asked questions to better understand everything from when you're eligible to how to maximize your benefits.

Am I eligible for Social Security?

You become eligible for Social Security by paying into the Social Security system and earning "credits." You need 40 credits to be eligible to receive Social Security. You can earn a maximum of four credits per year so you effectively need to have contributed to the Social Security system for at least 10 years to receive a benefit. The Social Security system is funded through Federal Insurance Contributions Act (FICA) taxes. The Social Security Administration levies a 12.4% tax on earnings (6.2% is paid by you, and 6.2% is paid by your employer) to fund Social Security benefits.

When can I start taking Social Security?

You can begin taking reduced Social Security benefits as early as age 62. At 62, however, you are not eligible to receive a full benefit as those who wait to receive their benefits at "full retirement age"; claiming at 62 reduces your benefit by 25%. Full retirement age is 66 for those who were born between 1943 and 1954; it moves closer to age 67 for those born between 1955 and 1960. For those born after 1960, full retirement age is 67.

How are Social Security benefits calculated?

The formula that the Social Security Administration uses to calculate your benefit is comprehensive, but generally speaking, it uses your highest-earning 35 years to compute a monthly index — known as Average Indexed Monthly Earnings (AIME) — to help you compute your monthly benefit.

To determine your highest-earning 35 years, consider this example: If you were making between $100,000 and $150,000 in your 30s, were out of work for a few years in your 40s, and then made between $175,000 and $250,000 each year until full retirement age, the Social Security Administration will not account for the years you were out of work when calculating your benefit. It will use your highest 35 years of income, which, in this case, would incorporate your salary from your income prior to being out of work.

How can I maximize my Social Security benefit?

If you are still earning high-income levels, you can continue to work longer and contribute to the system to increase your maximum Social Security payment (your highest 35 years of contributions).

One of the more popular methods to increase your benefits is by choosing to defer taking the benefit. While you are eligible to take a full benefit at age 66 or 67 (depending on your full retirement age), your benefit increases by 8% each year you defer. This 8% increase is allowed each year starting at your full retirement age up until age 70.

Consider this example: Tom's full retirement age is 66 and based on his highest-earning 35 years, his full Social Security benefit is $20,000 per year. Let's examine the graph below to see how Tom's Social Security benefit would change depending on what age he chooses to claim his benefit.


As you can see, Tom's annual benefit drops to $15,000 (25% less than the $20,000 at full retirement age) if he claims at 62. However, it rises to $27,210 if he waits until 70.

Are spouses eligible to receive benefits?

Yes - spouses may qualify to receive a full spousal benefit, which is half of your partner's retirement benefit. If you are eligible for more than one benefit (e.g. yours and your spouses) and you file for one of the benefits, you are "deemed" to have filed for both benefits and the government sends you the higher of the two benefits.

Are ex-spouses and widowers also eligible to receive benefits?

If you are divorced but you were married to your ex-spouse for 10 years or more, you may be eligible to receive a benefit if you fulfill all of these requirements:

  • You are unmarried
  • You are age 62 or older
  • Your ex-spouse is entitled to Social Security retirement or disability benefits
  • The benefit you are entitled to receive based on your own work is less than the benefit you would receive based on your ex-spouse's work

For widowers, you may receive a benefit if you are the widower of a person who worked long enough under Social Security. You can receive full benefits at full retirement age for survivors or reduced benefits as early as age 60.

Will my Social Security benefit amount change?

It may. Each year the government adjusts the benefit for inflation known as the Cost of Living Adjustment (COLA). COLA is based on the Federal Consumer Price Index (CPI). In 2009, for example, the COLA was 5.9%, but 0% in 2010 and 2011 due to price stagnation. In 2012, it was 3.6% but less than 2% for the next few years. For 2017, the COLA is 0.3%.

Should I defer taking my Social Security benefit?

It depends. There is no "one size fits all" answer when deciding to defer taking Social Security. The decision considers many important factors, including:

  • Income needs during retirement
  • Other sources of retirement income (pensions, IRAs, 401(k)s, etc.)
  • Personal health
  • Life expectancy

More information

There's more than one way to retire. Everyone has their own expectations and goals for their golden years. To learn how we can help you prepare for the retirement you want, schedule a Citizens Retirement Checkup at your nearest Citizens Bank branch.

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