Retirement Benefits

Find out what Social Security benefits you're eligible for.

Social Security retirement benefit payments are not automatic, so you must apply for them. Current Social Security Administration rules allow you to apply for benefits as many as three months before the month in which you want to begin receiving them. So if you are planning to retire in May, you can actually apply for benefits in February. In most cases, it's a good idea to apply in advance, since completing the application process can take some time. You are generally not eligible for benefits covering any period before the month in which you apply or in which you become eligible for benefits, whichever is later. However, if you retire at age 65 or older, you can apply for benefits at any time after you turn 65 and receive back payments of up to six months of benefits before the month in which you make your application.

Traditionally, age 65 has been the age for retirement, although many people choose to retire earlier and some choose to retire later. In any case, you become eligible for full retirement benefits under Social Security when you reach age 65. If you decide to retire before age 65, you are eligible to receive a reduced amount of Social Security benefits when you reach age 62. If you retire at age 62, the reduction in your benefit is 20 percent; if you retire at age 63, it's 13 1/3 percent; and if you retire at age 64, the reduction is 6 2/3 percent. This reduction in benefits is permanent, and you will always receive a lower monthly payment than you would have received if you had waited to retire until you turned 65.

On the other hand, your retirement benefits will be higher if you postpone your retirement past age 65, at least for the next several years. For example, in 1999, a worker who delayed retiring until he turned 66 received a 4 percent increase in the benefit he received. However, beginning in the year 2000, the age at which full retirement benefits will be paid will be gradually increased, so that by the year 2027 you will have to be at least 67 years old to obtain full benefits.

Deciding when to retire depends to some extent on considerations other than the amount of Social Security benefits you will receive. Your health, your other sources of retirement income, and your interest and ability in continuing to work all must be taken into account. Even so, knowing how much you can expect to receive each month from Social Security can help you reach your decision.

Beginning in the year 2000, Social Security will provide an annual earnings and benefit statement to every participant in the system. Until then, you can obtain an estimate of how much you will receive when you retire by completing Social Security Form 7004, "Request for Earnings and Benefit Estimate Statement." You can obtain this form from your local Social Security office, or by calling the Social Security Administration's toll-free telephone number, 1-800-772-1213. By calculating your past and present annual earnings along with your own estimate of the money you will earn each year until you stop working, the Social Security Administration can tell you approximately how much you will be eligible to receive upon retirement.

Form 7004 is also used to request the record of your annual earnings as reported to Social Security. It's important to review this information periodically and to report any mistakes you discover in your record. Mistakes can occur if you have changed jobs, worked for more than one employer at the same time, or for any number of other reasons, including simple clerical errors in reporting your correct Social Security number.

In some cases, fraud may also be the reason for an error in your record of earnings. For example, a record that shows income higher than what you've actually earned could mean that your number is being used by someone else, such as an illegal alien. According to some studies, as many as four million individuals are currently using false Social Security numbers -- one of these individuals may be using yours. And if the record shows earnings much lower than what you actually earned, it may mean that an employer isn't paying into the system as required, even though he may be withholding the required amount from your paychecks.

You aren't required to actually stop working in order to receive Social Security retirement benefits. But if you continue working, the benefits you receive from Social Security may be reduced if your wages exceed a specified amount, which changes each year. For example, if you are receiving retirement benefits in 1999 and are under age 65, you can earn no more than $9,600 in wages before having your Social Security benefits reduced. The reduction in benefits would equal $1 for each $2 you earned in excess of this amount.

If you are between the ages of 65 and 70, you can earn up to $15,500 without experiencing a reduction in your retirement benefits. If you earned more than this amount, your benefits would have been reduced by $1 for each $3 you earned in excess of the maximum. However, if you were 70 or older, you could work and earn as much as you wanted without having any reduction in your monthly retirement check.

Since 1983, some Social Security retirement benefits have been taxable. Under the 1983 tax reform law, benefit recipients paid taxes on as much as 50 percent of their Social Security retirement payments, if they were single and their total annual income (including Social Security) exceeded $25,000, or if they were married and their income exceeded $32,000.

Beginning in 1994, an additional income tier was added. Single Social Security recipients are required to pay taxes on up to 50 percent of benefits if their income is between $25,000 and $33,999 and on 85 percent of their benefits if they earn $34,000 or more. Married couples are subject to taxes on half their Social Security benefits when their income is between $32,000 and $43,999 and taxes on up to 85 percent of their benefits if their total income equals or exceeds $44,000.