Submitted by Kathy Goul, Family & Consumer Science Agent
K-State Research and Extension
Quarters, dates and dollars. Each of these play a role in understanding how Social Security operates, what benefits are available to you and your family and when you choose to start drawing your benefits.
The Social Security Act was signed into law by President Franklin Roosevelt in 1935, establishing Social Security benefits through trust funds. These trust funds are funded by FICA taxes collected through employment taxes and income taxes. As employees work, their FICA contributions are matched by their employer. At retirement, workers who have met eligibility requirements can receive retirement benefits.
While Social Security retirement benefits provide a major portion of many retirees’ income, these benefits were never intended to be, and often are not, the only source of income during retirement.
Count your quarters. Eligibility for benefits are dependent on a person’s earnings and qualified work quarters, or qualification through someone else’s record, such as your spouse. A work quarter is equal to three months. There are four work quarters in a year. The amount of earnings it takes to receive credit for a quarter may change each year.
In 2024, you must earn $1,730 during the quarter. To earn the maximum of four quarters in a year, you must earn a minimum of $6,920. Typically, you must have 40 quarters or 10 years of work to receive Social Security retirement benefits and Medicare Part A at a zero-dollar premium.
Know your dates. Social Security retirement benefit payments can start anytime between the ages of 62 and 70 once you reach the qualifying 40 work quarters. When choosing when to start your benefits, the date matters. If you want to receive your full social security payments, without a reduction in benefits, you will want to delay signing up for benefits until your full retirement age (FRA). Your FRA is set by Social Security, and is based on the year and month you were born. If benefits are started prior to your FRA, they will be reduced.
The age to start drawing Social Security benefits should be based on your personal situation. Your monthly benefit amount can differ greatly based on the age when you start receiving benefits. If you choose to start benefits before your FRA, your monthly benefit will be smaller, but you will receive it for a longer period of time. At your FRA, your benefit will be larger each month, for a shorter period of time. The amount you receive when you first get benefits sets the base for the amount you will receive for the rest of your life.
Track your dollars. Effective retirement planning involves budgeting! Knowing what dollars are coming in and going out of the household at any given time will help you determine the age at which you start drawing your social security. Consider both your actual income and expenses before retirement and your expected income and expenses after you retire. This can help you understand how a reduced or increased benefit will affect your ability to meet your needs in retirement.
If you plan to continue working while receiving benefits, there are limits on how much you can earn each year between age 62 and FRA and still get all of your benefits. For 2024, the annual earnings limit is $22,320. Once you reach FRA, your earnings do not affect your benefits.
As you consider your budget requirements and review your earnings history, you may find it beneficial to stay in the workforce, full or part time, for one or two additional years. The amount of your Social Security benefit is based on the average of your highest 35 years of earnings. Continuing to work may increase your Social Security benefit by replacing years with low or no earnings from your record with higher earnings.
The Social Security Administration has great online tools to help you on your road to retirement. Start by claiming your My Social Security account at www.ssa.gov/myaccount. Here you can track your actual earnings record, see your full retirement age and verify the estimated Social Security and Medicare taxes you have paid. You can also explore 20 online services and calculators to assist you in planning for retirement, calculating your benefits, and calculating the value of continuing to work at www.ssa.gov/benefits/calculators/. It’s never too early to start planning and understanding when you can claim benefits, what benefits you will have when you do, and the other benefits Social Security has to offer!
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