Enacted by Congress in 1935, Social Security has become a vital part of retirement security for Americans for 80 years. It was designed to supplement income derived by other sources of income, but in many cases has become the primary source of income for many people.

Because of this, applying for Social Security retirement benefits is an important process and making the right choices can provide optimal financial stability.

The application process by itself is fairly easy and can be accomplished either online, by telephone or in person at a local Social Security office. Generally, people can apply for Social Security when they turn 62, but in many instances, it makes good financial sense to delay applying for benefits.

By delaying benefits, you’ll draw more monthly income when you do file, and the amount you get may actually be larger due to additional work credits you can earn in the interim. To retire and qualify for benefits, a worker must earn a total of 40 work credits throughout their working lifetime. A credit is defined as earning at least $1,170 in a quarter. Social Security computes the actual benefit amount based on the highest 35 years of work where credits are earned.

Social Security also provides benefits for spouses and children as well. Spouses who have not been high wage earners throughout their lives can actually piggyback off of their spouse’s earnings and draw as much as 50 percent of a retirement benefit using their spouse’s Social Security record. Certain rules do apply in this set of circumstances. Divorced spouses may also qualify for benefits if their marriage lasted for at least 10 years and they do not remarry before applying for benefits.

In addition, if children meet requirements, they can also apply for benefits from their parents Social Security work records as well. They may be eligible for funds if a parent passes away and they are under 18 and still in school.

Once a benefit amount has been set, that dollar amount can’t go down, but it can go up, based on cost of living increases. Some benefit recipients may experience a temporary reduction based on income from other sources, but the base amount will always remain steady.

Some forms of income that do impact retirement benefits include wages earned as an employee, net earnings from self-employment and certain commissions and bonuses. However, several other forms of income do not impact benefits amounts and include: retirement and pension payments, unemployment benefits, prize winnings, IRA and Keogh payments and investment income.

Although Medicare is a separate benefit offered by the government, it is linked to Social Security retirement benefits in that it also provides a financial safety net for retirees. When you turn 65 and you’re enrolled in Social Security, you are also automatically enrolled in Medicare and insurance benefits kick in automatically.

Social Security benefit recipients do have to pay Federal taxes on their benefits, but due to income levels, only about one in three recipients actually pays out of pocket taxes. Social Security will send benefit recipients a Form SSA-1099 that should be used to complete tax returns each year. SSA will also withhold Federal taxes from benefits upon request to assist with tax issues for its customers.

For an overview of Social Security and to start applying for retirement benefits, go to www.socialsecurity.gov or call Social Security at 1-800-772-1213.

Who is Eligible for Social Security Retirement Benefits?

The U.S. Congress passed the 1935 Social Security Act as a way to supplement retirement earnings for primary working Americans. The original law also included the nation’s first unemployment insurance program as well as several health and welfare programs. Shortly thereafter, the law was changed to add survivor benefits for spouses and children, and in 1956 disability benefits were also added.

The Social Security Administration now serves 60 million Americans who will receive $870 billion in benefits in 2015. 

The administration of such a large benefits program can be complicated at times, with numerous special instances, exceptions and nuances that can impact how benefits are disbursed to recipients.

This guide will introduce applicants to the basics of applying for Social Security retirement benefits and answer many of the common questions that arise when first considering to apply for benefits. 

It will also address many special circumstances that can arise involving spouses and children, specific circumstances regarding timing, amounts, and maximizing benefits while also offering a comprehensive list of resources that may prove valuable throughout the Social Security retirement benefits process.

The impact of Social Security

Nearly one in five Americans receives some form of benefit from Social Security. Almost 80 years after it’s initiation, Social Security remains a vital lifeline for large numbers of Americans. Consider…

  • Nearly 40 million people receive retirement benefits with an average monthly benefit of $1,335.
  • Another 9.5 million people receive disability benefits with an average monthly benefit of $1,165.
  • Nearly 90 percent of people age 65 and older receive Social Security benefits, representing nearly 40 percent of their income.
  • One in five married couples and about half of unmarried elderly Social Security beneficiaries rely on Social Security for at least 90 percent of their income.

The basics of applying for Social Security retirement benefits

Social Security was envisioned as a “pay as you go” plan designed to augment other retirement plans for individuals. Throughout the course of your working life, Social Security taxes are taken from your paycheck and upon retiring, you are able to withdraw funds from Social Security. The amount you will get depends on several factors ranging from your age, to what your earnings were throughout your lifetime, and several other considerations.

While those possible permutations may be numerous, the actual application process is fairly easy.

You can apply in one of three ways:

  • Online: apply for benefits by going to www.socialsecurity.gov and following the steps on the page.
  • Phone: Call Social Security’s toll free number at 1-800-772-1213 (TTY 1-800-325-0778).
  • In person: make an appointment to visit a Social Security office at your convenience.

Depending on your situation, you may need some or all of the following documents when you apply:

  • Social Security number
  • W-2 Form or self-employment tax return 
  • Military discharge papers
  • Spouse’s birth certificate and Social Security number if he/she is applying for benefits
  • Divorce papers, if appropriate
  • Children’s birth certificate(s) and Social Security number(s) if you’re applying for children’s benefits
  • Proof of U.S. citizenship or Green Card if you were not born in the U.S.
  • Financial institution information, including your bank account number and routing number so that funds can be direct deposited into your account. You may opt to get benefits on a prepaid debit card instead, but by law, benefit checks are no longer mailed to recipients. 

NOTE: All documents must be originals or certified copies. Social Security will make a copy and return the originals to you.

The Big Question: When should I apply for retirement benefits?

The single biggest decision you’ll make when it comes to Social Security retirement benefits is when to apply.

Every person’s situation is unique and so there’s no single right answer. In general terms and based on life expectancies, Social Security retirement benefits are calculated to give you approximately the same total amount of benefits over your lifetime. If you decide to draw benefits earlier in your life, your average monthly amount will be less than if you delay and draw benefits later in life.

The amount you receive can vary widely. For example, if you were born in 1953 or 1954 and you were entitled to draw a $1,000 benefit at your full retirement age of 66, that amount would be $750 if you decided to draw benefits starting at age 62. But in that same scenario, if you delayed benefits until age 70, the amount would jump to $1,350.

There is no exact science when deciding when to apply, but here are some things to consider as you decide what’s best for you.

  • Health – If you are reasonably healthy, it may make sense to delay benefits. However, if you are experiencing health issues, you might find it wise to start your benefits at an earlier age. As an adjunct to this, if you come from a family with a long life expectancy, this may also influence your decision.
  • Health insurance – While your health may be good, if you retire from your company, you may lose your health insurance benefit. You can apply for Medicare at age 65, but if you retire from your company before that time, you may face a significant cost to provide yourself with health insurance. One of the most important things you can do is to determine if you have retiree health insurance benefits from your employer, or if you retire before Medicare kicks in, can you be covered under a spouse’s health insurance plan.
  • Other sources of income – You may still be working at age 62 when you are first able to apply for benefits, and if so, you probably do not need the immediate income that Social Security retirement benefits would add to your bottom line. If you are drawing retirement income from other sources and do not have an immediate necessary need for Social Security retirement benefits, it may also make sense to delay applying for benefits so that you can increase the amount you receive at a later date.
  • Drawing benefits from another person’s Social Security record – You may have the option to draw benefits as a widow, widower or surviving divorced spouse. If so, you can choose to apply for survivor’s benefits and put off applying for your own retirement benefit until a later date. By putting off drawing your own benefits, you can qualify for delayed retirement credits up to age 70. Delayed retirement credits can add as much as eight percent annually to your bottom line depending on when you were born, making a significant impact when you do decide to draw benefits.

Full Retirement Age vs. age 62

The following chart shows some of the possibilities and impacts that a person would encounter when deciding to retire at age 62 vs. their full retirement age, which can range from 65 to 67 years old.

Full Retirement and Age 62 Benefit By Year Of Birth

Year of Birth
Full (normal) Retirement Age
Months between age 62 and full retirement age
At Age 62
A $1000 retirement benefit would be reduced to
The retirement benefit is reduced by
A $500 spouse's benefit would be reduced to
The spouse's benefit is reduced by
1937 or earlier
65
36
$800
20.00%
$375
25.00%
1938
65 and 2 months
38
$791
20.83%
$370
25.83%
1939
65 and 4 months
40
$783
21.67%
$366
26.67%
1940
65 and 6 months
42
$775
22.50%
$362
27.50%
1941
65 and 8 months
44
$766
23.33%
$358
28.33%
1942
65 and 10 months
46
$758
24.17%
$354
29.17%
1943-1954
66
48
$750
25.00%
$350
30.00%
1955
66 and 2 months
50
$741
25.83%
$345
30.83%
1956
66 and 4 months
52
$733
26.67%
$341
31.67%
1957
66 and 6 months
54
$725
27.50%
$337
32.50%
1958
66 and 8 months
56
$716
28.33%
$333
33.33%
1959
66 and 10 months
58
$708
29.17%
$329
34.17%
1960 and later
67
60
$700
30.00%
$325
35.00%

If you were born on January 1st, you should refer to the previous year.
If you were born on the 1st of the month, we figure your benefit (and your full retirement age) as if your birthday was in the previous month. If you were born on January 1st, we figure your benefit (and your full retirement age) as if your birthday was in December of the previous year.
You must be at least 62 for the entire month to receive benefits.
Percentages are approximate due to rounding.
The maximum benefit for the spouse is 50% of the benefit the worker would receive at full retirement age. The % reduction for the spouse should be applied after the automatic 50% reduction. Percentages are approximate due to rounding.

(Source)

Life Expectancy Calculator for Social Security

Retirement benefit calculations are based on extensive actuarial studies and data. As a service to the public, the Social Security Administration has developed a simple Life Expectancy Calculator that allows you to plug in your gender and date of birth to get a rough estimate of how long you may live. 

Knowing this information may help you in deciding when the right time is to apply for retirement benefits.

To use the Calculator, go to https://www.socialsecurity.gov/planners/lifeexpectancy.html

Full Retirement Age Calculator for Social Security

One of the keys of deciding when to retire is determining when you will reach your full retirement age. Full retirement age, also known as normal retirement age, is the age you must reach to start receiving full retirement benefits from Social Security. This age varies depending on when you were born. Because people are generally healthier and living longer, this age has gradually been increasing. For people born before 1938, the full retirement age is 65. People born between 1938 and 1960 are on a scale that ranges up to age 67.

Social Security has developed a Full Retirement Age Calculator that will give you detailed information on when your full retirement age is and what percentage of benefits you can expect as a record holder or as the spouse of a record holder. All that’s required is for you to enter the year you were born.

To use the Full Retirement Age calculator, go to https://www.socialsecurity.gov/planners/retire/ageincrease.html

Earnings and their impact on your benefit amount

Certain types of earnings may reduce your actual retirement benefit amount, while others will not. Those that may reduce the amount you receive include:

  • Wages earned as an employee. These dollars will be calculated for the taxable year that you earn them.
  • Self-employment net earnings. These dollars are calculated for the taxable year that they are received.
  • Work related income, including commissions and bonuses.

Other types of earnings will not impact the amount of the retirement benefit you receive. Generally, these will include:

  • Retirement and pension payments
  • Unemployment and worker’s comp benefits
  • Prize winnings, unless part of a compensation structure
  • Tips of less than $20 in a month
  • IRA and Keogh payments
  • Investment income
  • Income earned after you reach your full retirement age

In some instances, other types of income may affect the bottom line of your retirement benefit amount. It’s best to check with your tax professional or call the Social Security Administration at 1-800-772-1213.

Spouses and retirement benefits

Deciding when to draw Social Security retirement benefits can impact the benefits your spouse is eligible to receive as well. After one spouse dies, the surviving spouse is entitled to the higher of the two spouses’ benefits. That means it’s best for a higher earning spouse to delay taking benefits for as long as possible, so that they can get the highest possible benefit, not only for themselves, but for their surviving spouse if they pass away first.

Based on actuarial studies, after a married couple reaches 65 years old, a majority of the time, one spouse will outlive the other by as much as 10 years. So the decision on who should file for benefits and when that should take place can have a major long-term impact on the income of a surviving spouse.

Spouses who never worked or have had low earnings throughout the course of their life are entitled to receive up to half of their spouse’s full retirement benefit. Depending on your personal situation, you may receive your own benefit or a blended amount of both you and your spouse’s benefit. Either way, you will receive a combination of benefits that gives you the highest possible amount.

One strategy often employed is for a spouse to take their spouse’s retirement benefit and delay taking their own benefit. By doing so, you can continue to accrue delayed retirement benefits which will result in a larger benefit amount when you file for your own retirement benefit.

Spouses are eligible to receive 50 percent of their spouse’s full retirement benefit if they wait until they reach full retirement age. If they apply for a spousal retirement benefit before that time, the amount is pro-rated, depending on the age at which the spouse applies. For example:

If a spouse applies for a spousal retirement benefit at age 62 and the full retirement benefit is age 67, the applicant will get 32.5 percent of the spousal benefit.

If a spouse applies for a spousal retirement benefit at age 62 and the full retirement benefit is age 65, the applicant will get 37.5 percent of the spousal benefit.

The benefit increases as ages go up, to a maximum of 50 percent at full retirement age. It should also be noted that only one spouse can apply for a “spouses benefit” when a couple is married.

In cases of divorce, the divorced spouse can get retirement benefits on the spouse’s record if the marriage lasted for at least 10 years. To collect this benefit, the spouse must be at least 62 years old and not married. That benefit does not impact the amount a spouse and their current married partner can get.

Children and retirement benefits

More than four million children receive Social Security benefits each month because one or both of their parents are disabled, deceased or retired. 

These funds help stabilize families and children at a critical time in their lives, helping them to complete high school and give them a good start toward college or being able to work full time with a high school diploma.

Biological, adopted and dependent step-children are eligible to get benefits if they meet certain criteria:

  • At least one parent who is disabled or retired and eligible for Social Security benefits.
  • A parent who passed away after attaining enough work credits in a job where he or she paid Social Security taxes.
  • The child must be unmarried and under age 18, or
  • 18-19 years old and a full-time student who is in no higher than grade 12. College students are excluded.
  • 18 years or older and disabled.

When a child meets these criteria and a parent begins receiving Social Security retirement benefits, the child may be eligible for up to half of the parent’s full benefit amount or 75 percent if the parent is deceased. However, there is a maximum amount per family that ranges from 150 to 180 percent of the parent’s full benefit amount. When payments exceed this threshold, each family member’s benefit is reduced proportionally until the total is equal to the maximum amount allowed for the family.

Survivor and death benefits

Wage earners depend on Social Security retirement benefits to help meet financial needs when they stop working, but sometimes these earners can pass away early and unexpectedly. When workers pay into Social Security, a majority goes to fund disability and retirement costs, but a portion of their taxes go toward survivors benefits as well.

When a worker passes away, some family members may be eligible for survivors benefits if the worker earned enough credits during their working lifetime. Eligible family members include widowed spouses who are 60 or older, 50 or older if they are disabled, or any age if caring for a child who is under 16 years old. Children of deceased workers are also eligible if they are not married and under 18 years old, or under 19 years old but still in school. If you’re divorced and you or your spouse pass away, the surviving spouse could be eligible for a widow(er)’s benefit as well.  

If a worker has enough work credits when they pass away, Social Security will also make a one-time payment of $255. This payment can be made only if the spouse or child meet certain specified requirements.

To apply for survivor’s benefits, Social Security will need the following, either original copies or certified copies, from the issuing agency.

  • Proof of death from a funeral home or a death certificate
  • Social Security numbers for the applicant and the deceased person
  • The applicant’s birth certificate
  • Marriage license or divorce certificate
  • Dependent children’s Social Security numbers and birth certificates
  • The deceased person’s tax return or W-2 forms from the most recent year
  • A bank and account number so that benefits can be deposited directly into your bank account.

Appealing a claim that’s been denied

Almost half of all Social Security benefit applications are denied. While the vast majority of these deal with disability benefits, sometimes retirement benefits are denied as well.

Some of the reasons why a retirement benefit application might be denied include:

  • You have not accumulated enough work credits in your work life
  • Your application has missing or incorrect information
  • You submitted your application too early. You can’t apply until about four months before you turn 62.
  • You are already receiving Social Security disability benefits. Retirement and disability payments serve the same purpose; to provide financial security when a person is not able to work any longer.
  • If you are a surviving spouse, you do not meet the minimum age requirement or you got remarried before you turned 60. 

If your benefit application is denied, you must submit an appeal within 60 days after you get a written notice from SSA. To start the appeal process, complete Form SSA-561-U2 Request for Reconsideration. Explain your reasons for seeking reconsideration and submit any additional documentation that will help you make your case to Social Security officials.

The Request for Reconsideration is the first of four possible levels of appeal for Social Security retirement benefits. It is an informal review of your application and in many instances, when new information is submitted or issues are clarified, this level of appeal can lead to a reinstatement or approval of benefits. 

If the first level does not produce desired results, applicants can go to the second level of appeal which is a hearing in front of an administrative law judge. This is an independent review made outside the decision-making processes of Social Security.

If you are still not satisfied, you can take your case to the Social Security National Appeals Council in Washington, D.C. 

The last level involves filing a lawsuit against the Social Security Administration in a Federal Court.

Medicare and retirement benefits

Although Medicare is a separate benefit offered by the government, it often times goes hand in hand with Social Security retirement benefits as a means of providing a financial safety net for retired workers.

Medicare is the government sponsored health insurance plan for people who are at least 65 years old. The only exceptions to this are the disabled or those who have permanent kidney failure, both of whom can get Medicare at any age. 

Medicare is broken into four parts:

Part A – Hospital insurance that helps pay for in-patient hospital care and some follow-up services.

Part B – Medical insurance that helps pay for doctor’s services, outpatient hospital care and related medical services.

Part C – Medicare Advantage Plans allow people to combine Part A and Part B to get medical services from a single provider organization.

Part D – Prescription drug coverage helps pay for prescribed medications.

Medicare and Social Security benefits are linked in that when you turn 65 years old, your Part A Medicare hospital insurance begins automatically. If you live in the United States or U.S. territories, you’ll also be enrolled in Part B Medical insurance coverage as well.

Regardless of whether or not you’re getting Social Security benefits, you should sign up for Medicare about three months before your 65th birthday.

If you have limited financial resources, some states may be able to assist you with Medicare premiums and other related expenses, such as deductibles. Benefits will vary by state and it’s best to contact a local or state medical assistance agency or welfare office to get answers. 

Social Security’s “Extra Help” program can assist with Part D prescription drug coverage for those people who have limited income. Social Security will help in determining eligibility, completing and processing applications and work with applicants to see if they can also be enrolled in Medicare Savings Programs. For more information, Social Security maintains a website at www.socialsecurity.gov/extrahelp

Paying taxes on your retirement benefits

Social Security retirement benefit recipients must pay Federal income taxes on their benefits. Due to personal income levels, about one-third of recipients actually have to pay some amount annually.

Each year, the Social Security Administration will mail recipients a Form SSA-1099 that shows the amount of benefits received during the preceding year. This form should be used to complete tax returns and help determine in any taxes are owed.

As a general rule, if you file as an individual and your combined income is between $25,000 and $34,000, you may have to pay taxes on up to 50 percent of your Social Security benefits. If your combined income is more than $34,000 you may be required to pay taxes on up to 85 percent of your benefits.

If you file a joint return and you and your spouse’s income is between $32,000 and $44,000, then 50 percent of your benefits may be taxed. If your combined income is about $44,000, then up to 85 percent of your benefits may be subject to income tax.

To assist with tax planning, Social Security can withhold Federal taxes throughout the year for benefit recipients which may be preferable to making quarterly estimated tax payments.

Direct Deposit: It’s the law!

Effective March 2013, a new law went into effect requiring that all Social Security benefits be paid electronically. This means benefits due to you are directly deposited into a bank account of your choosing. The change means a quicker delivery of benefits as well as being safer and more convenient for customers.

The U.S. Treasury administers the Direct Deposit program and can answer questions for customers who call their helpline at 1-800-333-1795. For information and to sign up for the electronic delivery of funds, go to the Go Direct website at https://fiscal.treasury.gov/GoDirect/

The Treasury will also grant waivers in rare instances. To request a waiver or for more information, call 1-855-290-1545.

How to contact the Social Security Administration

Website: www.socialsecurity.gov

Phone: 1-800-772-1213 (automated 24 hours a day, live operators 7 am to 7 pm, Monday through Friday)

TTY number: 1-800-325-0778

E-mail: Fill out a contact form located at https://faq.ssa.gov/ics/support/ticketnewwizard.asp?style=classic