Frequently Asked Questions about Applying for Social Security Benefits

As more and more baby boomers reach retirement and begin applying for Social Security benefits, questions naturally arise regarding the amount of benefits to expect, when to expect them, and whether the system will cut back on certain benefits. Find the answers to these questions and more below.

How does Social Security work?

Social Security is a "pay as you go" insurance plan intended to supplement any other retirement plan you have (i.e., savings, pension). As you work throughout your lifetime, Social Security taxes are taken out of your paycheck. There are various timing considerations when applying for social security benefits, depending on the type and amount of benefit you require.

There are two types of benefits--retirement and disability Social Security. If you are disabled and have paid into the system, you may be eligible for Social Security disability. Click here for more information on Social Security disability insurance.

Who is eligible to collect Social Security?

To qualify for Social Security retirement benefits, you need to earn at least 40 Social Security credits. What this means is that anyone born in 1929 or later needs to have worked at least 10 years. If you were born before 1929, fewer years are required. Disability credits are calculated slightly differently, and for information on Social Security disability benefits, click here.
Note that you may only claim one type of Social Security benefit. If you choose to accept the disability Social Security plan, you may not receive Social Security retirement benefits and vice-versa.

Also, for the following types of workers, the Social Security Administration has different rules (if you fall into one of these categories, visit the Social Security website to determine your eligibility):

• farm laborers
• government employees
• military
• non profit employees
• household employees

When can I begin collecting Social Security benefits?

The normal retirement age (NRA) is 65-67, depending on when you were born. For those born before 1938, the age is 65 and for those born in 1938 or later, the NRA gradually increases by monthly increments. If you were born in 1960 or later, your NRA is 67. To determine your retirement age, visit the Social Security website here.

You may claim early benefits starting at age 62, but they will not be the full benefits you would receive by waiting for your full retirement age.

Applying for Social Security benefits (benefits are not paid automatically) involves some work on your part. You must fill out some forms and provide certain documentation such as your birth certificate, Social Security card, etc. You should apply four months before you want to being receiving your benefits. You can apply online here, visit your local Social Security office, or call 1-800-772-1213 to get the ball rolling.

How much will I receive in Social Security benefits?

Because the system is based on how much you put into it, the benefits you receive are dependent on factors such as how long you've been in the workforce, how much you earned and the age at which you decide to begin receiving your benefits.

You can claim your benefit as early as age 62, but your benefits will be reduced by the number of months between the time you claim your early benefits and your NRA. This reduced amount will be your permanent monthly payment (meaning it won't increase when you hit your NRA), and could mean a maximum of a 25% reduction from your full benefit amount.

Spouses and ex-spouses may also collect up to 50% of their spouse's (or ex-spouse's) benefits. See below under maximizing benefits.

How is the benefit amount calculated?

The actual calculations are complicated, but in very basic form, the Social Security office will take your highest earning 35 years and average them, adjusted for inflation. This number is then used to calculate your average indexed monthly earnings, and then a formula is applied to that average to determine your benefit amount. Note that this is the full benefit, based on claiming benefits at the full retirement age. Claiming benefits early will reduce this number.

The Social Security website has a calculator for estimating your benefit amount on its website.

How can I maximize my benefits when planning for Social Security and retirement?

Because the system is based upon the top 35 years of your earning career, an obvious step is to earn as much as you can. Beyond the obvious, there are several strategies to consider in order to maximize your benefits.