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Understanding Social Security

Social Security is a system enacted in 1935 to keep workers from falling into poverty upon retirement. The program was designed to provide basic retirement benefits for workers reaching age 65. Social Security monthly benefits can be as high as $3,000, but benefit payments are regularly adjusted based on the Consumer Price Index (CPI) increases. Social Security benefit payments are guaranteed and supported by the Social Security Trust Fund and provide half or more retirement income for many retirees.

Workers who pay (or have paid) Federal Insurance Contributions Act (FICA) taxes are covered by Social Security. After paying into the system for at least 40 quarters (10 years on average), they are fully insured and will be eligible to receive retirement income benefits. These benefits are based on a worker’s highest earnings over a 35-year period. If a worker has not paid into the Social Security system for 40 quarters, he or she is not eligible for full Social Security retirement benefits.

Social Security can be received any time after age 62 but filing prior to the full retirement age and continuing to work will reduce the benefit amount based on the amount earned. In 2020, earning less than $18,240 annually will not affect the benefit amount. When the full retirement age is reached, earning more than $18,240 will affect the amount received – for every $2 earned, the benefit will be reduced by $1. In the year the full retirement age is reached, the earning threshold increases to $48,600. Earning more will reduce the benefit by $1 for every $3 earned over the limit. Upon reaching full retirement age, there is no deduction to the worker's benefit based on earnings.

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Social Security Spousal and Survivor Benefits
Spousal benefits may be available to those who are currently married or who were married but are now divorced. Benefits may be available if a spouse passes.
When to Take Social Security Benefits
Social Security benefits can start as early as age 62 or as late as age 70, but to receive full retirement benefits depends on the year of birth.
How Benefit Programs Help Budgets
Thousands of public and private programs are available to seniors with a qualifying income. These programs pay for health care, prescriptions and food.

Age Well Planner is an educational website created by nonprofit the National Council on Aging (NCOA). We provide information, resources, and referrals on topics such as: Benefits, Income, and Medicare.

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