15 Things You Need to Know About Social Security
Chock full of complexities, Social Security is an extremely dynamic program that changes constantly. This post will help you sort through the clutter by pinpointing 15 details to know about the program.
Key Takeaways
- Social Security is funded by FICA payroll taxes, and you need 40 credits — about 10 years of work — to qualify.
- Your benefit is based on your highest 35 years of earnings and the age you claim; you can start at 62, but you don't get 100% until your full retirement age (67 for those born in 1960 or later).
- The longer you wait, the larger the benefit — roughly 7% per year from 62 to FRA and about 8% per year from FRA to 70.
- Benefits aren't automatic (you must apply), are adjusted yearly for inflation (COLA), and can be taxable.
- You may be able to claim on a spouse's or ex-spouse's record, receive survivor benefits, and work while collecting (subject to an earnings limit before FRA).
Payroll taxes finance Social Security
The federal government charges a payroll tax—FICA (Federal Insurance Contributions Act)—to fund Social Security (and Medicare) programs. This tax is levied on both employees and employers, who each currently pay 7.65% in total FICA tax—6.2% of which funds Social Security and the remaining 1.45% Medicare. Self-employed workers pay the full 15.3%, 12.4% of which is allocated towards Social Security; they can generally deduct half this rate (7.65%), however, when filing their tax returns.
An income cap for the Social Security portion of FICA ($184,500 in 2026), meanwhile, means any earnings beyond this threshold are not subject to Social Security tax.
You need enough Social Security credits to qualify
While most Americans qualify for Social Security benefits, you might not realize that some in fact don’t. Why? One must earn a minimum of 40 credits over the span of his/her working life in order to meet related requirements.
Based on 2026 laws, an individual will receive one credit for every $1,890 earned in income—with a maximum of four credits per year (that’s $7,560 earned). Forty credits is therefore roughly equal to 10 years of work.
To help illustrate this concept further, someone who earns a wage of $20 per hour must work 94.5 hours to receive one credit.
Finally, keep in mind that average earnings over your working years—rather than the number of credits earned—impacts your monthly benefit amount.
You’ll want to max out your Social Security earnings
Though calculated using a complex formula, Social Security benefits are generally based on your highest 35 years of covered earnings and the age at which you begin receiving benefits—with a maximum monthly payout of $5,181 at age 70 (in 2026). Your covered earnings are wages on which you’ve paid Social Security or payroll (FICA) taxes.
If you lack a 35-year work history, your benefit calculation will still include non-work years; Social Security will simply enter a zero for each year with no earnings reported. It’s therefore important to raise your lifetime income average by replacing zero or low-income years with higher incomes until you start collecting; doing so will help maximize the benefit owed to you.
Also keep in mind that to compute your final benefit, the Social Security Administration factors in the national average wage index (NAWI) that tracks year-by-year wage trends. Without going into too much detail, the SSA indexes your earnings history in the year you turn 60 to adjust the same for wage inflation. Consequently, if the NAWI drops that same year (which is rare but does happen), your Social Security benefits can as well.
An exception to this calculation does exist, however; if you’re aged 60+ and still working, indexing ceases and your earnings flow directly into your earnings record—unadjusted—and can therefore boost the likelihood this time period will represent your new “top 35” years.
Finally, it’s good practice to check your Social Security statement every year rather than assume the numbers on there are accurate. After all, a miscalculation for even just a year or two can potentially impact your benefits for the rest of your life!
It’s important to know your full retirement age (FRA)
While you can begin receiving Social Security benefits at age 62, you aren’t entitled to 100% of them until reaching what’s known as your “full retirement age” (FRA)—which is based on your year of birth.
For example, the current FRA for those born in 1960 or later is 67. Note this metric is subject to change and may gradually tick higher to shore up the program's finances. According to the 2025 Social Security Trustees Report, the trust fund that pays retirement benefits is projected to be depleted around 2033, after which incoming payroll taxes would cover only about 77% of scheduled benefits. It therefore seems likely the program will rely on measures such as a gradual FRA increase for the next generation of beneficiaries.
The longer you wait, the larger your benefit
As the age at which you decide to collect Social Security determines the amount of your monthly benefit, choosing to receive benefits before you reach your FRA will result in a permanent reduction to the same.
More specifically, claiming before your full retirement age permanently reduces your monthly benefit—by about 6.7% for each of the first three years you claim early, and roughly 5% for each additional year before that (a total reduction of about 30% if you claim at 62 with an FRA of 67). Waiting past your FRA works in the opposite direction: you earn delayed retirement credits of about 8% per year up to age 70. Claiming after age 70 provides no further increase.
Payments don’t start automatically
When you decide to collect your monthly Social Security benefits (noting you can apply as early as four months before you turn 62 to start receiving benefits at that age), you must apply with the SSA either online, in person, or over the phone by calling 1-800-772-1213. Furthermore, Social Security payments lag by a month—meaning the earliest you’ll receive your first payment is at age 62 plus one month.
Your benefit amount increases alongside inflation
Laws dictate the Social Security Administration (SSA) prevent inflation from eroding the purchasing power of benefits paid to recipients, accomplishing this via a cost-of-living adjustment (COLA) based on the Consumer Price index (CPI-W). The CPI-W tracks retail prices as they affect urban hourly wage earners and clerical workers, and the SSA announces this cost-of-living adjustment every October.
Think of COLA like a raise in your annual paycheck. Although this “raise” only covers the cost of inflation, you’ll often see a corresponding increase in your benefits every year.
Social Security benefits are not guaranteed
Though you might have assumed otherwise, Social Security benefits are in fact not guaranteed—with no contracts or special rights mandating such benefits. That said, it’s best to think of Social Security as a government spending program: one that Congress and the president may change, reduce, or even—though highly unlikely since payroll taxes are here to stay—eliminate at any time. It’s therefore now more critical than ever to seek out additional streams of income during retirement.
Social Security benefits are liable to taxes
Unfortunately, Uncle Sam doesn’t retire when you do. In fact, Social Security benefits are liable to federal tax depending on the earnings listed on your income tax return. If your total income exceeds $25,000 (for an individual) or $32,000 (for a married couple filing jointly), you must pay taxes on your Social Security income. The specific benefit amount subject to taxation varies based on income level.
As some states also levy taxes on Social Security income, it’s critical to consider this when calculating your cash flow needs during retirement.
You can work and collect Social Security benefits simultaneously
| Your situation | 2026 earnings limit | What's withheld |
|---|---|---|
| Under FRA all year | $24,480 | $1 withheld for every $2 earned above the limit |
| The year you reach FRA | $65,160 | $1 withheld for every $3 above the limit (earnings before your FRA month only) |
| At or after FRA | No limit | Earnings never reduce your benefit |
If you work before hitting your full retirement age, the dollar amount of your monthly Social Security check is sometimes temporarily reduced if you earn more than the yearly earnings limit set by the Social Security Administration (SSA).
Based on 2026 limits, the SSA will deduct $1 from your Social Security benefit payments for every $2 you earn above the annual earnings limit if you fall below your FRA for the entire year. In this scenario, the current limit is $24,480; if you earn $25,000 annually, for example, Social Security will withhold $260 of your benefits (as you're $520 above the earnings limit).
If you work during the year you’ll reach your FRA, Social Security will deduct $1 for every $3 you earn above the limit; the 2026 limit is $65,160 in this scenario and only includes earnings before the month you reach your FRA. If you earn $70,000 from January through October and don’t hit this age until November, for example, $1,613 is withheld. For those still working when they reach full retirement age, their earnings no longer reduce their benefits no matter how much they earn.
Keep in mind that withholding means the Social Security Administration will stop sending you a check until they recoup the amount owed. For example, if you owe $3,500 and your monthly Social Security check is $1,000, you won’t receive a check for four months—with the balance owed ($500) refunded to you at a later date.
It’s important to note that for each of the scenarios outlined above, you won’t lose your benefits: they’re technically just deferred and then credited when you reach your full retirement age.
Your spouse (or even your ex) can claim benefits on your record
| Spousal | Divorced-spouse | Survivor | |
|---|---|---|---|
| Most you can get | Up to 50% of their FRA benefit | Up to 50% of their FRA benefit | The higher of the two checks |
| Earliest age | 62 | 62 | 60 |
| Key requirements | Married 1+ year; your spouse has filed. | Marriage lasted 10+ years; you're unmarried. | Meet survivor conditions; kept if you remarried at 60+. |
If you’re currently married, divorced, or even widowed, you may be entitled to Social Security benefits based on your partner’s (or ex’s) work record: an advantage known as "spousal benefits." If you're divorced, you can claim on an ex-spouse's record if the marriage lasted at least 10 years.
You can qualify in a few ways. If you're currently married, your spouse generally must have already filed for their own benefits, you must be at least 62, and you must have been married for at least one year. If you're divorced, you can claim on an ex-spouse's record if the marriage lasted at least 10 years, you're at least 62, and you haven't remarried.
If you decide to claim spousal benefits, your benefit amount is based on the age you retire and the amount your spouse qualifies for. Nevertheless, the most you can earn is 50% of his/her full Social Security benefit.
To receive the entire 50%, you generally need to wait until your full retirement age (FRA)—when you’re entitled to receive full Social Security benefits—to collect. This is currently age 67 for those born in 1960 or later.
Social Security survivor benefits exist
When one spouse passes away before the other, the surviving spouse can receive what’s called a “survivor benefit” that allows him or her to collect a check or the check of the deceased—whichever is higher—regardless of whether the surviving spouse has earned enough credits.
While the monthly benefit is still reduced if taken at an early age, widows can begin taking benefits at the age of 60 rather than waiting until age 62.
Social Security offers do-overs
Social Security offers the chance for a “do-over”: meaning if you claimed your benefit and then regretted doing so for any reason, you can “withdraw the application” and restart the benefit at a higher amount (based on the age you reapply).
Keep in mind, however, that you can take this mulligan only once—within the first 12 months of claiming benefits—and you’ll need to pay back all benefits you and your family receive.
Social Security benefit suspensions are available
If you’ve reached your FRA and are under age 70, Social Security allows you to suspend your retirement benefits. In this scenario, there is no requirement to repay any of your benefits and you’ll earn credits of approximately 8% per year—resulting in a higher monthly payment. You can reinstate benefit payments at any time until the month you turn 70, which is when they’ll automatically kick in once again if you don’t take action otherwise.
Social Security pays benefits to children
Social Security pays benefits to unmarried children who either have a parent who is retired or has a disability and is entitled to Social Security benefits or one who passed away after paying Social Security taxes (and working long enough to do so). Furthermore, the unmarried child must be either younger than 18, between the ages of 18 and 19 and a full-time student (grade 12 or below), or age 18 or older with a disability since prior to age 22.
In sum: what you need to know about Social Security
Social Security is undeniably the most important social program our country offers, providing an estimated 50% of income for half of America’s seniors and at least 90% of income for about 1 in 4.
Nevertheless, the program is also filled with complexities and extremely dynamic. Hopefully this post provided clarity regarding key program elements to expand on your existing Social Security knowledge.
Still have questions? See our answers to the most common Social Security questions or Schedule a FREE discovery call with one of our CFP® professionals.
Reviewed for accuracy
Benjamin Stark, CFP®
Financial Advisor and Director of Client Experience at Vision Retirement, with 10+ years as a financial advisor.
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Disclosures:
This document is a summary only and is not intended to provide specific advice or recommendations for any individual or business.
