10 Essential Things You Need to Know About Social Security

Blog | August 16th, 2018

Receiving your first paycheck is a rite of passage that comes with a life lesson: You don’t get to bring home all the money you earn. After you get over the initial shock of learning that payroll taxes exist, most people pay little attention to their standard payroll deductions for the next few decades. Sure, you might hear that Social Security is expected to run out of money someday, but that doomsday date, and your retirement date, for that matter, are in the distant future.

Until that future becomes not-so-distant and you think, “Help! I don’t know anything about my Social Security!” Can you afford to retire? When can you retire? Will Social Security still be there? Here are 10 things you need to know about your Social Security.

Social Security Is Older Than Many People Receiving It

The Social Security Act was signed into law in 1935, and retired legal secretary Ida May Fuller was issued the very first Social Security check on Jan. 31, 1940. The idea behind the program was to provide guaranteed income for retired workers. Social Security was later expanded to provide monthly income for the disabled and for the dependents of deceased workers. Last year, more than 66 million Americans were getting some form of monthly Social Security income.

Social Security Isn’t A Right

Contrary to what many believe, every American isn’t entitled to Social Security. You have to work to earn the right to receive it. In 2018, for example, you earn a “lifetime work credit” for $1,320 in pre-tax earnings, and you can earn up to four of those lifetime work credits a year. You need 40-lifetime work credits to draw Social Security during retirement, so you’ll have to work at least part-time for 10 years to receive it.

Social Security Is Not Intended To Replace Your Income

The Social Security Administration says that Social Security is intended to replace an average of 40 percent of a worker’s pre-retirement wages. In 2018, that added up to an average of $1,404 per month for retired workers. About one-third of retirees count on Social Security for 90 percent or more of their income, but the other 65 percent of retirees have private pensions or other investments.

You Can Get Raises, Even In Retirement

Since 1975, Social Security recipients have been given Cost of Living Adjustments annually. For 2018, the COLA adjustment was 2 percent.

The Longer You Wait To Draw Social Security, The More You Will Receive

Assuming you have accumulated your 40 Lifetime Work Credits, you can file to start receiving monthly Social Security benefits at age 62, but you may not want to. The so-called full retirement age for Americans born in 1960 or later is age 67. You can start drawing benefits any time between age 62 and age 70, but your benefit will increase the longer you delay it. For example, the Social Security Administration says that if your full benefit (the amount you would get if you started drawing benefits at your full retirement age of 67) is $1,300 per month, you would only draw $953 per month if you started receiving Social Security benefits at age 62. If you waited to draw those same benefits until age 70, your monthly benefit amount would increase to $1,661. In 2017, only 3 percent of Americans were opting to wait until age 70 to start drawing their Social Security, but working those few extra years may be worth it. And what if you plan to keep working into your 80s? You will still have to start drawing Social Security at age 70.

It’s Easy To Estimate Your Potential Monthly Benefit

In addition to the age at which you intend to start drawing benefits, your monthly benefit amount is determined by your earnings history. If you have already qualified for Social Security, it takes just a few minutes to find out what your monthly benefit would be under the current law. The Social Security Administration has a retirement estimator at that can calculate it for you.

Your Social Security May Be Taxed

This one’s complicated, but the answer may be yes. Often if you are receiving income in addition to your Social Security retirement benefits, some of your Social Security income may be subject to federal tax. In addition, 13 states currently tax Social Security income. You will want to consult your accountant or tax attorney to determine how this will affect you.

You Can Work And Draw Social Security Benefits

If you have reached full retirement age or waited later than that to start receiving your Social Security benefits, you can work and still receive your full monthly benefits. If you file for Social Security benefits between ages 62 and your full retirement age, you can work, but depending on how much you make your monthly benefits may be reduced until you reach full retirement age.

You Need To Plan Ahead To Draw Your Social Security

The Social Security Administration says you should apply for Social Security benefits three to four months before you want to start receiving them. You can apply online at or in person by making an appointment at a local Social Security office. And don’t forget about Medicare. In most cases, if you are approaching age 65 and are eligible for Social Security, you are also automatically eligible for Medicare health coverage. If you wait to enroll in Medicare after age 65, you may have to pay a penalty.

Social Security Will Still Be Around When You Retire, We Think

The Social Security Administration says that because Americans are living longer, and therefore drawing their retirement benefits longer, the trust fund that pays Social Security benefits will be depleted by 2034. That’s sobering, but it doesn’t mean that your Social Security benefits will disappear. Surveys have found that an overwhelming majority of Americans are opposed to any cut to Social Security benefits, making it highly unlikely that the lawmakers elected by those Americans will cut benefits or end Social Security altogether. What is likely is that those payroll taxes we all enjoy paying may go up, and the full retirement age, which has gradually been raised from 65 to 67 over the past few decades, may be raised again for future generations.