Social Security Benefits 101

What to Expect When You File and How You Can Boost Your Benefits

At what age do you plan to file for Social Security benefits? You know how it works: you work, you pay, you collect, right? What can you expect and what if you work longer? Many Americans are putting off retirement and collecting later in life to maximize Social Security benefits. Are you ready to get back to work or do you plan to keep working? Let’s explore Social Security benefits a little more before you decide.

Who Can File for Social Security Benefits?

You can file for Social Security benefits if you or your spouse are either one of the following:

  • Retired
  • Disabled
  • Widowed

When you apply for Social Security benefits, your status above will determine how much you can expect to receive. For the sake of this article, we will focus on retirement benefits. Full retirement age is 66 years old.

How to Get Retirement Benefits

To earn Social Security benefits, you must have earned Social Security credits during your life. Social Security credits are earned when you pay Social Security taxes at your place of employment. In 2015, workers earned 4 credits for every $1220 earned, with a maximum of 4 credits earned in one year. Once you earn credits, they stay with you. The number of credits you need to retire depend on when you were born.

  • Retirees born after 1929 need at least 40 credits of file for Social Security retirement benefits. Forty credits are 10 years of work history.
  • If retirees were born prior to 1929, the number of credits reduces by one per year prior to 1929: born in 1928, only 39 credits needed; born in 1927, only 38 credits needed; and so on.


Not all Jobs Are Created Equal

If you think you are ready to retire because you have 10 years of continuous work experience, not so fast. Some jobs are treated differently than others.

  • Military members can earn additional credits for service between 1957 and 2001.
  • More than 10 years of service with the railroad does not count toward Social Security benefits. Railroad Retirement benefits are paid to employees with more than 10 years of employment.
  • Credit for self-employment is based on when the self-employed are paid, not when the income is earned.
  • Chores or household duties completed by children younger than 21 years of age does not count toward Social Security benefits.
  • Children 18 years of age and older, who work at their parents’ or family’s business, may qualify for Social Security benefits.

How are Social Security Benefits Calculated?

Okay, so you have your 40 credits. Now what? Do you remember receiving your Social Security benefits statement each year? The print-out tells you for how much you are eligible. Benefits are calculated on your lifetime earnings. There are three factors that determine your social security benefits:

  • Previous earnings in terms of today’s wages to show growth.
  • SSA considers the average of your highest earnings in 35 years. The average is divided by the number of months it took to arrive at the average. This is the Average Indexed Monthly Earnings, or AIME.
  • Finally, the SSA applies the formula to generate the benefits amount payable at the full retirement age.

The key here is to work at least 35 years. If you have years of unemployment, working longer will only increase your benefit amount. If you have 35 years of earnings under your belt, you can continue to work longer or go back to work once you retire.

Earning More for Working Longer

Many people are not ready to call it quits when they turn 65. Sixty-five is nothing now. Baby Boomers are active, they are living longer, and they are deciding to stay at work much longer than their parents did.

A Transamerica Center survey found that 65% of Baby Boomers will work past the age of 65 or do not have retirement plans. This trend has a lot to do with the increased life expectancy of Baby Boomers, financial burdens, and sheer enjoyment of working and daily activity.  Working longer has its financial perks as well.

Working longer increases a person’s benefits by delaying the retirement credits and increasing the AIME. If you are past the earnings age and no longer subject to the earnings test, you may be able to earn benefits while you work and increase the number of years reflected in your work history when your benefits are calculated.

What You Need to Know About Working and Your Benefits

You can still earn and collect your Social Security benefits if you are at your full retirement age. After you are the full retirement age, which is 66, there is no limit to how much you can earn. PLEASE NOTE: if you are younger, a limit to your earnings does apply. This is the Earnings Test.

  • $1 for every $2 dollars you earn in 2016 above $15,720.
  • Until your retirement age—if you turn 66 in 2016—the benefits reduce by $3 for every $41,880 you earn until it is your birthday.

To benefit from your current income and Social Security benefits—that are not reduced—you must be at the current retirement age of 66. If you start to draw benefits earlier, your benefits amount reduces if you continue to work, even if it is for yourself.

What to Consider Before You Apply for Benefits

Before you apply for Social Security benefits, consider the following:

  • Are you 66? Can you work until you are 66?
  • Did you face any years of low income or lapses in employment?
  • Can you afford a reduction in benefits prior to turning 66?
  • Have you earned fewer than 35 years of earnings?
  • Are you eligible for spousal benefit?
  • Can you work beyond age 66? Delaying your benefits can raise then benefit by as much as 8% per year.
  • Are you ready to retire?


Many people are not ready to retire. Now they don’t have to. Waiting a little longer has a big payoff if you time if just right. Thanks for reading this post. Please leave a comment below, and if you really liked it please share on your Facebook page.





investing for retirement ebook ipad - McClain Lovejoy
investing for retirement ebook ipad - McClain Lovejoy
SUBSCRIBE: Get updates and grab your copy of our free guide, “Investing For Retirement Income: Straw, Sticks or Bricks?”