Social Security is relied on by millions of Americans and is the bedrock of the United States retirement system. In 2024, according to the Social Security Administration (SSA), almost 68 million Americans per month will receive a Social Security benefit, totaling about $1.5 trillion in benefits paid during the year. This retired workers, dependents, disabled individuals, and survivors of deceased workers. This large number indicates that Americans recognize the importance of Social Security for their financial well-being.

Help yourself understand Social Security and its benefits by reading these frequently asked questions.

When can I collect Social Security and how is my benefit calculated?

Generally speaking, you can begin collecting benefits as early as 62 and as late as 70. You need 40 credits, or ten years of earnings, to qualify for Social Security benefits. The SSA looks at your highest 35 years of payments, indexed to today’s dollars. The longer you delay benefits, the greater your monthly benefits.

When should I collect Social Security?

One of the most significant decisions is when to start collecting your Social Security benefits. The decision to take Social Security early or later will depend on your financial situation, goals, and your spouse’s anticipated life expectancy.

Generally speaking, if you can afford to delay collecting your benefits and believe you will live long enough to make up for the payments you lost when you delayed, it could make sense to wait to collect. Since a surviving spouse effectively collects the higher of their or their deceased spouse’s benefit, a larger benefit (as a result of delaying) could help hedge against longevity risk. It’s important to weigh the pros and cons carefully and consider consulting with a financial advisor to help you make the best decision for your needs.

How is Social Security taxed?

You may have to pay federal income taxes on your Social Security benefits. It all depends on your federal tax filing status and your combined income. Your combined income is defined as your adjusted gross income (from your tax return), any nontaxable interest, and half of your Social Security benefits. Depending on this total amount and your federal tax filing status, up to 85% of your Social Security benefits may be taxable.

What happens if I work while collecting Social Security retirement benefits?

You can collect Social Security retirement benefits and work at the same time. However, your benefit is reduced if you are younger than full retirement age and make more than the yearly earnings limit. However, starting with the month you reach full retirement age, your benefit will not reduce no matter how much you earn.

Social Security uses the following earnings limits to reduce your benefits:

• If you are under full retirement age for the entire year, $1 is deducted from your benefit payments for every $2 you earn above the annual limit.
• In the year you reach full retirement age, $1 is deducted in benefits for every $3 you earn above a different limit, but we only count earnings before the month you reach your full retirement age.
• If you reach full retirement age in 2024, the limit on your earnings for the months before full retirement age is $59,520. Starting with the month you reach full retirement age; you can get your benefits with no limit on your earnings.

To see how you may be impacted if you collect Social Security while working, use the Retirement Earnings Test Calculator. Understanding your Social Security will help you become a more confident and informed retiree. Remember, Social Security is not just a retirement benefit, it's a key component of your financial security in later years.

Expand your confidence and learn more about Social Security, by calling Members Services at 1.800.642.6543 from 8:30 a.m. to 9:00 p.m. ET.

Travis Marks, CFP®, CFA®, is the Director of Generations University for the Pension Boards, responsible for the education initiatives for Pension Boards members, employers, and internal staff. Prior to joining the Pension Boards, Travis worked as Senior Manager of the National Financial Education Practice (FEP) for PricewaterhouseCoopers. He has more than 16 years of financial planning, education, and management experience, and has a passion for helping people improve their finances.