Get The Facts: Everything You Should Know About Your Social Security Benefits

You, the American worker, are spiriting along toward retirement. No matter your age today, retirement is careening toward you at a blistering pace. Young people have plenty of opportunities between the present and their future exit from the workforce. Older Americans have less opportunity, but still plenty of time to make the most of their remaining working years. One aspect of this transition has been in force for close to a century, helping Americans make the most of their post-working life. The Social Security Administration made its first payment to Ida May Fuller in January 1940, and millions of Americans have since followed in her footsteps to claim their benefits to support a long and healthy retirement.

As a worker existing within the American taxpaying ecosystem, you're virtually guaranteed coverage under the Social Security umbrella. Almost no workers will end up falling through the cracks — although some federal employees paid into a separate pension fund that wasn't subjected to Social Security contributions and will receive retirement benefits through alternative means. But this doesn't mean you can just blindly count on Social Security checks to come rolling in. Plenty of strategy remains when considering your Social Security picture as a part of the larger whole of retirement. Whether it's in calculating your benefit amount and exploring how that figure is reached or understanding the rules of the program itself, these are key factors surrounding your Social Security benefit that you need to know.

First of all, it's certainly interesting to note that Social Security is the federal government's largest financial commitment. In 2023, the program claimed 22% of the federal budget's total funding allotment (over $6 trillion total, making Social Security a roughly $1.34 trillion expense). The prioritization of a social safety net for retirement is due in part to a growing volume of claimants. With baby boomers aging into the retirement bracket today (the youngest boomers out there are 57, making them only a few years off benefits eligibility) and lifespans at some of their longest figures in U.S. history, there are more people than ever claiming Social Security benefits — around 67 million in 2023.

It's worth noting this fact when exploring any facet of the Social Security program. The benefits help raise millions out of poverty, with an estimated figure of 22.7 million more people experiencing poverty conditions if Social Security benefits didn't exist. These economic realities help ground a discussion of the program's layout and benefits.

Almost everyone working in the United States today pays into the Social Security trust fund through standard payroll tax adjustments. With each check you receive from work, you're contributing to the resource pool that pays out today's Social Security benefits. The program isn't an individual retirement account that you pay into and then utilize later on, instead, it's a fund that pays benefits to current recipients with the help of incoming taxes in contemporaneous collection. The fact that almost everyone working in America will ultimately draw a Social Security check when they reach retirement age is a serious comfort.

Whether your check will ultimately be large or small, the knowledge that your contributions to the program today will eventually pay it back when you need the funding later on is a big boost in confidence. Given the fact that Social Security benefits are so potent in raising the standard of living for lower earners when they reach their golden years, the program has remained a major boon for workers up and down the economic range. Social Security benefits aren't means-tested either, allowing virtually everyone who contributes in the American marketplace to reap the rewards later on.

With the universality of Social Security benefits on full display, it's also important to note that benefits through this program alone are almost certainly not enough to cover your day-to-day living expenses in retirement. Social Security benefits replace around 40% of a typical wage earner's pre-retirement salary, with progressive benefit figures raising this correlation among the lowest earners (as much as 79% for those averaging around $16,000 per year) and lowering it for higher earners (as little as 28% for the highest salary earners). For reference, experts suggest that retirees will need somewhere around 70% to 80% of their pre-retirement income figure to experience roughly the same lifestyle that they've become accustomed to.

This means that beneficiaries will certainly gain value from their monthly checks, but that personal retirement savings will also be necessary to make ends meet. The amount you need to set aside for retirement will vary depending on an infinite set of variables unique to your lifestyle, but calculating a baseline savings goal isn't actually all that difficult.

"Full Retirement Age" is a term used to understand the age you need to reach before you can claim your "full benefit." While you can technically retire from the workforce anytime you want (as long as it's financially viable), reaching your full retirement age will allow you to claim a Social Security check that's 100% of your benefit amount. Claiming early is possible, but it comes with a reduction that minimizes the financial value of the benefit.

The most important thing to remember about your full retirement age is that it's a legislated number and not something set in stone. For many years, retirement age was 65. In 1983, the federal government successfully passed a law that would progressively push this threshold back — in part, assisting in maintaining solvency of the Social Security fund's reserve cash. Anyone born in 1960 or later exhibits an FRA age of 67. People born in 1959 will reach theirs at 66 and 10 months, and so on back to people born between 1943 and 1954 (with an FRA of 66, although the youngest among this cohort would be 69 today). It's also possible that this scale could be reset again, with full retirement age for younger people pushed back once more. Understanding where you stand here, and keeping in mind that it could change, it critically important when planning your retirement date.

People who reach the age of 62 become eligible to receive their Social Security checks. You might consider retiring early and taking these payouts before reaching full retirement age because you've met other financial goals and can afford it. Others might opt to stay in the workforce longer for a variety of reasons. At 62, you'll be eligible to receive a benefit check valued at 70% of your full retirement age payment figure. With each year you wait, getting closer to your FRA number, the reduction is decreased (by 8% each year). Pundits like Dave Ramsey suggest taking your benefits early and investing the checks yourself, but it's worth noting that if you stay in the workforce your benefit may be reduced depending on your earnings figure, potentially even substantially.

On the other hand, if you wait until after reaching full retirement age to claim benefits, you'll be entitled to an enhanced payout rate. Waiting until you're 70 gives you a 124% benefit (with the 8% increase remaining roughly intact in the years after your FRA). Waiting and claiming a boosted benefit is certainly worth considering, especially for those who aren't quite ready to give up their working life just yet as they approach or hit the front of their retirement age window.

While it might seem convoluted to those new to exploring Social Security's rules and benefit values, there's a relatively simple way to work out your benefit. The math is based on an average of your highest 35 earning years in the workforce. For some, this can mean a calculation method that takes into account zero-earnings years spent in education or out of work because of illness, injury, or a layoff.

It's also possible that one or more years in part time employment or a student job factor into your benefit matrix rather than the many years you spent later on in full time employment. Understanding how this averaging is done can help you make smarter decisions about when you should retire. For instance, if you spent the first years of your career in a low paying job or one making an average salary before earning a major promotion or changing career paths, your 35 years might see a sort of two-part story. Many of your counted working years might come in far lower than the rest. Staying in the workforce for an extra few years to replace those lower figures can drastically change the benefit amount you'll receive when you do choose to retire — not to mention the boost you'll get from waiting until you hit or exceed your FRA.

A lot of attention is paid to calculating the benefit amount you can expect when you retire. But there's another aspect to the Social Security benefit check that you might not have known about. Rather than coming as a static figure for the rest of your life, Social Security checks are adjusted every year to account for the slow march of inflation. Social Security benefits' Cost of Living Adjustment, or COLA, is assessed at the end of every calendar year, and then added automatically to checks beginning in January the following year. These adjustments are modest, but ensure that recipients aren't being left behind when it comes to the steady increase in the cost of living that all Americans have to account for. Inflation is typically the primary driver here, and with an average COLA of 2.75% over the last decade, it falls roughly in line with typical inflation numbers. The adjustment for 2024 (heading into 2025) was recently announced, and has been set at 2.5%.

It's worth keeping in mind the COLA augmentations are percentage-based. This means that if you receive a larger-than-average Social Security check, the total dollar amount of your adjustment will be larger, too. This is yet another reason to consider waiting to draw Social Security benefits, allowing your check to receive the bonus add-ons that come after reaching your full retirement age.

One aspect of being in that 97% who receive benefits comes in the form of Social Security's eligibility requirements. For most Americans, the need to accumulate 40 "credits" isn't a major hurdle. The SSA allows workers to earn four credits per year, with a credit granted for each roughly $2,000 you earn in salary payments (in 2024 it's $1,730, for 2025 the figure is $1,810). What this means is that a regularly employed worker earning even a tiny salary each year will become eligible to receive Social Security benefits when they retire after 10 years of collecting credits, with plenty of American workers surpassing this barrier in their 20s or 30s).

This requirement isn't an obstacle for most Americans, but it poses an important question for foreign workers coming to the United States. Your paycheck will be assessed Social Security taxes, regardless of your long-term plans or ability to take benefits later on. But a foreign worker who spends less than 10 years employed in the country before moving on (or an American that moves abroad before reaching that threshold) may find that they're not eligible to claim benefits when they reach retirement. Fortunately if you're someone in this position there are many working years to strategize between aging into the workforce at 16 or 18 and reaching the exit as a 60- or 70-something if drawing Social Security benefits are important to you.

Social Security benefits are primarily framed as a retirement income opportunity, but it's not just a program designed to assist people who have left the workforce. In its totality, Social Security provides for disability payments (requiring fewer than the 40 credits to attain retirement benefits), as well as spousal benefits and child benefit payments. If you're married to someone who is eligible for Social Security benefits or spend 10 years married to an eligible recipient before getting divorced, you can claim a spousal benefit if the payout figure is more valuable to you than your own benefit would be. Spousal benefits are even available to those who haven't accumulated their own 40 credits — perhaps you've been married for many years and spent the majority of your adult life at home caring for your family's children rather than earning a paycheck.

The Social Security Administration also covers Medicare, the health insurance program serving those 65 and older. Medicare is a large and diverse program broken up into "parts." But the basic framework seeks to provide for retired people who naturally still need good healthcare services to maintain an active and enjoyable lifestyle.

One of the most important features of the Social Security framework for younger people is the ability to check in on their record. You don't have to wait until you reach retirement age to contact the Social Security Administration and explore your benefit amount and options for drawing a monthly Social Security check. Logging into the My Social Security portal (you'll need to work through a few verification steps to access your sensitive personal information) allows you to see how much you've been taxed in contributions to the program, as well as details on your earned credits, disability payment amount if you were to require it, and more.

With the yearly earnings figures organized as a table, you can see how much the SSA has given you credit for in terms of earnings and taxation. With this information (if you haven't yet reached 40 credits) you can calculate your prospective payout rate at different benefit-taking ages. If you have passed that threshold, the SSA report will include details on how much you might expect to receive, directly. Maintaining a consistent knowledge of where you stand financially is a critical part of any retirement planning strategy. With the murkiness of Social Security hiding behind the behemoth of federal infrastructure, it's easy to discount gaining knowledge here. The reality is that it's easy to check in on, so every worker in America should make sure they do it.

Many people think of the date they start claiming Social Security benefits as a concrete division between pre-retirement and something that comes afterward (perhaps more working years, but with the addition of Social Security checks). The reality is that you can reverse this decision, so long as a few key rules are met. You can pause your benefits, or return the funds you've received if you've been drawing checks for less than a year to reset the timer on your benefit payout rate.

Those continuing to work can also change the values in their top 35 earning years, as noted previously. All of these avenues allow beneficiaries to alter the value of their Social Security check, even after they decide to start drawing benefits. It's a system with plenty of flexibility, even if it might not see to be on the surface.

Finally, it's critically important to know a few key facts about the future of the Social Security program. Reporting from the SSA's Board of Trustees in 2024 revealed to the nation that the program's reserve fund would become insolvent in 2035 if no action is taken in the interim to raise funding amounts. This is obviously alarming, but it doesn't mean that the Social Security Administration will run out of money and stop paying benefits. It does, however, mean that if no legislative action is taken to shore up the reserve, payment figures will be reduced by a little over 20% in the next decade.

The uncertainty of the project's future isn't something to panic over, but it's absolutely something that Americans should cautiously keep an eye on. The federal government has a tendency to teeter on the edge of hazardous circumstances before coming together to take action. Whether this happens regarding Social Security payments or not remains to be seen, but it's worth noting that CRFB, a watchdog organization reported earlier this year that President-Elect Trump's campaign trail tax plan may ultimately push up this insolvency timeline by as many as three years. It will therefore be crucial for workers of all ages to keep a close watch on how the government handles this looming sore spot.