Social Security FAQs

February 21, 2024 Beginner
We answer common questions about Social Security to help you maximize your retirement benefits.

Social Security can be a complex topic, so it pays to ask questions and understand the answers. Here are some of the more common ones.

1. Who's eligible to receive Social Security benefits?

To qualify, you or your spouse must have held a job covered by Social Security and paid the Social Security payroll tax for at least 10 years (those years needn't be consecutive). A nonworking spouse is potentially entitled to up to half of the working spouse's benefit. To collect benefits, you must generally be age 62 or older, disabled, or blind.

2. How are benefits calculated?

There are two formulas at work: One is based on your 35 highest-earning years indexed for inflation and another that transforms that calculation into the monthly benefit estimates we understand. The bottom line is the more you earn over your lifetime, the more you can expect to receive from Social Security. Higher earnings in the years just before retiring may also increase your benefit. 
 
That said, there's a limit to the amount of annual income that qualifies for the Social Security calculation. The taxable maximum is $168,600 in 2024.1 If you earn more than the annual maximum in a given year as an employee, the income above that threshold won't be subject to the 6.2% Social Security payroll tax (for the self-employed, the rate is 12.4%).

3. How can I increase my benefit?

Although there's nothing you can do to revise your earnings history, there are other steps you can take to boost your Social Security payouts:

  • Work longer: If you don't yet have 35 years of income history, every additional year you work replaces a zero-income year. And if you're currently earning your peak income, every additional year you work could replace a year in which your earnings were lower. 
     
  • Wait to collect: Although you can start collecting Social Security as early as age 62, waiting to collect will boost your monthly check. Receiving your benefits before full retirement age—which is between 66 and 67, depending on your birth year—will reduce your payment between 5% and 7% each year. If you can afford to wait, every year you delay past retirement age will increase your annual payout about 8% until age 70, when the benefit increases stop. You'll receive from 24% to 32% more than if you had begun collecting at your full retirement age—and roughly 76% more than if you had begun collecting at 62.

Of course, it's not always possible to work longer or wait to collect. Those in poor health or who need the income to make ends meet, for example, might decide to take Social Security as soon as possible.

When waiting pays off

If you're in good health, have a spouse, and live into your late 70s or longer, waiting to collect Social Security can be rewarding. But also remember, Social Security isn't just an investment or a break-even analysis. It's a form of insurance to protect you by providing income that increases with inflation for as long as you live.

The cumulative benefit in today's dollars of collecting at 62 would be surpassed at age 77 if you wait to collect at 67 and at 80 if you wait until 70. The cumulative benefit of collecting at 67 would be surpassed at age 84 if you wait until 70.

Source: ssa.gov

Hypothetical cumulative benefits assume the retiree was age 62 in 2023, age 67 in 2028, and age 70 in 2031 and began collecting a monthly benefit in January of each year. Monthly benefit for starting at age 62 would be $2,572 compared to $3,674 at age 67 and $4,556 at age 70. Benefits shown are in today's dollars.

The example is hypothetical and provided for illustrative purposes only. Monthly benefit at any age varies widely by individual based on their earning history.

4. What's a good strategy for spouses?

A lot of couples want to start collecting both spouses' Social Security right away, but doing so may not be the best choice if one of you earned significantly more than the other. It often makes sense for the higher-earning spouse to wait as long as possible—up to age 70. Depending on health and finances, the lower-earning spouse can collect benefits earlier.

After the death of one spouse—regardless of whether they were the lower- or higher-earning one—the surviving spouse receives the larger of the two benefits for the remainder of their lifetime.

There are other factors and strategies to consider when filing for benefits as a couple. A financial planner or National Social Security Advisor can help you weigh your options. 

5. Can my kids inherit my Social Security benefit?

In addition to your spouse, dependent children and even grandchildren may be eligible to receive benefits when you die, become disabled, or retire. To qualify, your dependent must be unmarried and meet certain age requirements:

  • Be under the age 18;
  • Or under age 19 and attending a primary or secondary school full time;
  • Or any age if they were disabled before the age of 22

For minors, payments stop when they turn 18. For students, payments end when they graduate or two months after their 19th birthday, whichever comes first. For dependents with a disability, payments continue until they marry. 

"The rules are complex, especially around disability," cautioned Rob Williams, managing director of financial planning at the Schwab Center for Financial Research. He recommends consulting the appropriate benefit specialists at the Social Security Administration (SSA).  

6. Is Social Security going to run out of money?

According to the SSA, the surplus in the two Social Security trust funds—the Old-Age and Survivors Insurance Trust Fund, which pays retirement and survivors benefits, and the Disability Insurance Trust Fund, which pays disability benefits—will be exhausted in 2034.2

However, "exhausted" is a relative term. It doesn't mean that benefits are projected to stop. As of March 2023, Social Security would still be able to pay out about 80% of current and future benefits.3
 
"We believe, as do most analysts as well as the Trust Fund Report, that Social Security will continue to pay—but there may be changes, depending on action from Congress, to maintain the full funding amount," said Williams. That could mean later retirement dates for future recipients, reduced benefits for retirees who can afford it, or increases to the Social Security payroll tax to raise more money.  

"Lawmakers may well do something in each of those three categories," Williams added, "though it seems unlikely that benefits would go away entirely." Of course, if you're worried about potential changes, there's one sensible way to try to hedge against that risk: save more.  

"Today, there's a greater individual burden than ever before to save for retirement," Williams concluded. "It's important to fully understand and plan for your Social Security benefit but just as necessary to understand that it was never intended to be your sole source of retirement income."

1"Contribution and Benefit Base", ssa.gov, 2/6/2024, https://www.ssa.gov/oact/cola/cbb.html

2"Trustees Report Summary," ssa.gov, 12/27/2022, https://www.ssa.gov/oact/trsum/

3Ibid.

The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision.

All expressions of opinion are subject to change without notice in reaction to shifting market conditions. Data contained herein from third-party providers is obtained from what are considered reliable sources. However, its accuracy, completeness or reliability cannot be guaranteed.

Examples provided are for illustrative purposes only and not intended to be reflective of results you can expect to achieve.

Supporting documentation for any claims or statistical information is available upon request.

This information is not intended to be a substitute for specific individualized tax, legal, or investment planning advice. Where specific advice is necessary or appropriate, Charles Schwab & Co., Inc. (“Schwab”) recommends consultation with a qualified tax advisor, CPA, financial planner, or investment manager.

The information and content provided herein is general in nature and is for informational purposes only. It is not intended, and should not be construed, as a specific recommendation, individualized tax, legal, or investment advice. Tax laws are subject to change, either prospectively or retroactively. Where specific advice is necessary or appropriate, individuals should contact their own professional tax and investment advisors or other professionals (CPA, Financial Planner, Investment Manager) to help answer questions about specific situations or needs prior to taking any action based upon this information.

The Schwab Center for Financial Research is a division of Charles Schwab & Co., Inc.

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