Government Benefits

How Social Security Works

Social Security replaces a percentage of your pre-retirement income, based on your lifetime earnings. The Social Security system caps the amount of your income it takes into account to figure your benefit. Any income above the cap is not counted in your benefit calculation and is not subject to Social Security taxes.

Because Social Security replaces only part of your income, it’s important to monitor your FMP benefits and personal savings closely.

Eligibility

You must earn at least 40 Social Security credits to qualify for Social Security benefits. You earn credits when you work and pay Social Security taxes, at a rate of four credits a year, for a total of roughly 10 years. It doesn’t matter when the credits are earned, and your benefits are not paid out based on this number. The credits are simply to make sure you’re eligible for benefits.

When to Apply for Benefits

Full, unreduced Social Security benefits are payable when you have 40 credits and reach what Social Security calls your “full retirement age,” which:

• Is currently 66 for someone born between 1943 and 1954,
• Gradually increases to 67 for those born between 1955 and 1960, or
• Is 67 for anyone born in 1960 or later.

If you decide to retire early (before full retirement age), your benefit payments will be reduced permanently according to a formula. This reduction could be up to 25% of what you would have received at full retirement age. If you choose to work past full retirement age, your benefit will increase by a certain percentage each month you defer your benefit, until it reaches the maximum at age 70.

For help deciding when to claim your Social Security benefit, visit ssa.gov.

Taxes and Social Security

If you have other substantial income (such as wages, self-employment, interest and dividends or other taxable income), you’ll likely need to pay federal income taxes on Social Security benefits. For more information contact your local Social Security office.

Spouses and Survivors

If you’re married but only one of you is eligible for Social Security, the other can still receive benefits. The spouse who is ineligible for benefits will receive a certain percentage of the working spouse’s Social Security benefit. Typically, the non‑qualified spouse must be 62 to receive the spousal benefit.

If you and your spouse both qualify for Social Security benefits, you’ll each receive your own benefit. Visit ssa.gov for information about maximizing the spouse benefit and the best time to start receiving it.

Social Security can also pay survivor benefits for your family in the event of your death, even if you have fewer than 40 credits.