Sep 21, 2023 3 min read

Social Security is an important retirement asset. While most people understand the general concepts, there is also a lot of unknown information that could increase your benefits. Today’s discussion is going to be about retirement benefits, exclusive of disability and possible children’s benefits.

There are three different ways to qualify for a monthly check. The first is based on your own work record. Employees pay into to Social Security from every paycheck they receive during their working life. The employer contributes a matching amount. If someone is self- employed, they must pay both halves. To receive the total benefit amount, you must work until full retirement age (FRA). For anyone born in 1954 or before, that age is 66. Anyone born after 1960 must be 67. For the five years in between, the FRA increases by two months each year.

The second way to collect benefits is to be married to a benefit-eligible spouse. To receive spousal benefits, you must have been married for at least nine months unless you lose your spouse to an accidental death. This rule is to try to reduce “death-bed marriages” just to provide benefits to someone else.

Spousal benefits will equal one-half of a partner’s benefit at full retirement age. If benefits are begun prior to FRA, the recipient will receive a reduced benefit for life. This rule is the same for starting any type of benefit before full retirement age. Spousal benefits can be collected from a spouse even if you are divorced as long as you were married for at least 10 years and you do not remarry. If you do get married again, you can collect benefits from your new spouse.

The third way to collect benefits is if your spouse dies. Survivor benefits are the same as the deceased spouse was receiving. If that amount was higher than the survivor was receiving, the spouse will surrender their own check and receive the higher survivor’s benefit. It is important to remember that upon the first death, income will go down but many expenses will not, and some may even increase.

Many expenses such as utilities, property taxes and repair costs will not go down even though income has been reduced. What will go up drastically will be income tax. Single taxpayers get only half of the free money from personal exemptions. The tax bracket is only about half it is for single taxpayers than married filing jointly. It is important for people to have a proactive tax plan to help reduce the tax pain of the death of a spouse. This is especially true for people with large balances in qualified retirement accounts such as 401Ks and IRAs.

Some other important facts to remember is if you start to receive Social Security retirement benefits, you are subject to an earning test if you start benefits before full retirement age. For 2023, that amount is $21,240. If you earn over this amount, you will lose one dollar for every two dollars over the limit.

If you start benefits before FRA, you will get a smaller check for the rest of your life, amounting in a loss of about 6½% a year. It is especially important to wait as long as possible to trigger the larger benefit for a couple, as the survivor may depend on these checks for decades.

Gary Boatman is a Monessen-based certified financial planner and the author of “Your Financial Compass: Safe passage through the turbulent waters of taxes, income planning and market volatility.”