Social Security is a critical aspect of financial planning for many individuals and families in the United States. It provides a safety net for retirees, disabled individuals, and survivors of deceased workers. While most people are aware of the basics of Social Security, there are numerous rules and nuances that often go unnoticed. In this article, we’ll explore ten rules of Social Security that you probably didn’t know about but should be aware of to make the most of this essential program.
Eligibility for Benefits May Extend to Divorced Spouses
Many people believe that only current spouses are eligible for Social Security benefits based on their partner’s work record. However, divorced spouses may also qualify for benefits if certain conditions are met. To be eligible, you must have been married to your former spouse for at least ten years, be currently unmarried, and not be eligible for a higher benefit on your own record. Additionally, your ex-spouse must be eligible for Social Security benefits, and you must be at least 62 years old to apply.
Social Security Benefits Are Taxable for Some Recipients
While Social Security benefits can provide much-needed income during retirement, they may also be subject to federal income taxes. If your combined income (adjusted gross income + nontaxable interest + half of your Social Security benefits) exceeds a certain threshold, you may need to pay taxes on some of your benefits. The specific thresholds depend on your filing status, with higher-income individuals paying taxes on a greater percentage of their benefits.
You Can Delay Benefits to Increase Payouts
Many people are eager to claim Social Security benefits when they become eligible at age 62. However, you can significantly increase your monthly benefit by delaying your claim. Each year you delay claiming benefits beyond your full retirement age (which varies depending on your birth year), your benefit increases by about 8% until age 70. This can result in a significantly higher monthly payout if you can afford to wait.
Working While Receiving Benefits Can Reduce Payments
If you choose to claim Social Security benefits before your full retirement age and continue to work, your earnings can reduce the amount you receive. In 2023, if you are under your full retirement age for the entire year, you can earn up to $19,560 without reducing your benefits. If you earn more than this limit, Social Security will deduct $1 from your benefits for every $2 you earn above the threshold. Once you reach your full retirement age, your benefits are no longer reduced, regardless of your earnings.
Survivor Benefits Are Available for Widows and Widowers
When a spouse passes away, the surviving spouse may be eligible for survivor benefits, which can provide crucial financial support during a difficult time. To qualify for survivor benefits, you must be at least 60 years old (50 if you are disabled) and have been married to the deceased for at least nine months. In some cases, divorced surviving spouses may also be eligible if certain conditions are met.
You Can Suspend Benefits to Earn Delayed Retirement Credits
If you start receiving Social Security benefits before your full retirement age and later decide that you want to increase your future benefits, you have the option to suspend your benefits. By suspending, you can earn delayed retirement credits, boosting your benefits when you resume them later. This strategy can be especially beneficial for those who initially claimed benefits early but later regret that decision.
Children Can Receive Benefits Based on a Parent’s Record
Social Security benefits aren’t limited to retirees and their spouses. Depending on their parent’s work record, dependent children may also be eligible for benefits. To qualify, the child must be unmarried and under the age of 18 (or 19 if they are still in high school). Disabled adult children may also be eligible if their disability began before age 22.
Ex-Spouses Can Receive Benefits Without Affecting Primary Beneficiary
If you’re divorced but meet the eligibility criteria, you can receive Social Security benefits based on your ex-spouse’s record without affecting their or their spouse’s benefits. This can be especially helpful if your ex-spouse’s work history makes you eligible for a higher benefit than you would receive on your own record.
Noncitizens May Qualify for Social Security Benefits
Social Security benefits aren’t restricted to U.S. citizens. Some noncitizens may qualify for benefits if they meet certain criteria, such as legally working in the United States and earning enough credits. Some international agreements may also allow non-U.S. citizens to receive Social Security benefits.
Social Security Administration Can Help You Maximize Benefits
Navigating the complexities of Social Security can be daunting, but you don’t have to do it alone. The Social Security Administration (SSA) provides valuable resources and assistance to help you understand and maximize your benefits. You can create an account on the SSA website to access personalized benefit estimates and other useful information. Additionally, you can visit your local SSA office or speak with a representative over the phone to get answers to your specific questions.