How are my Social Security benefit amounts calculated?

The calculations are complicated. The amount of any benefit is determined by a formula based on the average of your yearly reported earnings since you began working.

But to complicate matters, Social Security computes your average earnings differently depending on your age. If you reached age 62 or became disabled on or before December 31, 1978, Social Security averages the actual dollar value of your total past earnings -- and bases the amount of your monthly benefits on that amount.

If you turn 62 or become disabled on or after January 1, 1979, Social Security divides your earnings into two categories: Earnings from before 1951 are credited with their actual dollar amount, up to a maximum of $3,000 per year; and from 1951 on, yearly limits are placed on earnings credits, no matter how much you actually earned in those years.

Can I keep a job even after I start collecting retirement, dependents, or survivors benefits?

Yes, and many people do just that. People who are past full retirement age may work and earn any amount without losing any of their Social Security benefits.

However, people who collect Social Security before the year in which they reach full retirement age will lose one dollar of those benefits for every two dollars they earn over a set yearly limit. For the year 2006, that limit is $12,480. The limit applies only to earnings from work; it does not apply to income from such things as savings, investments, pensions, or rental property. In other words, earnings from these sources will not affect your Social Security benefits.

The Social Security Administration has added a special twist for the year in which you reach full retirement age. During the months of that year that are prior to your birthday, you will lose one dollar of benefits for every three dollars you earn over a set yearly limit. For the year 2006, that limit is $33,240 (counting only earnings from the months prior to your birthday). After your birthday, you can earn any amount of money without losing benefits.

For more information, see Social Security, Medicare & Government Pensions: Get the Most Out of Your Retirement & Medical Benefits, by Joseph Matthews (Nolo).

Can I collect more than one type of benefit at a time?

No. You may qualify for more than one type of Social Security benefit at a time, but you can collect just one. For example, you might be eligible for both retirement and disability, or you might be entitled to benefits based on your own retirement as well as on that of your retired spouse. You can collect whichever one of these benefits is higher, but not both.

Can I claim spousal benefits if I'm divorced?

You are eligible for dependents benefits if both you and your former spouse have reached age 62, your marriage lasted at least ten years, and you have been divorced for at least two years. This two-year waiting period does not apply if your former spouse was already collecting retirement benefits before the divorce.

You can collect benefits as soon as your former spouse is eligible for retirement benefits. He or she does not actually have to be collecting those benefits for you to collect your dependents benefits.

If you are collecting dependents benefits on your former spouse's work record and then marry someone else, you lose your right to those benefits. You may, however, be eligible to collect dependents benefits based on your new spouse's work record. If you divorce again, you can return to collecting benefits on your first spouse's record, or on your second spouse's record if you were married for at least ten years the second time around.