Essential Social Security Facts American Citizens Should Know

Eventually, regardless of your current age, Social Security will become an important part of your life. If you're uninformed, you could make mistakes that can impact your benefits, or just negatively affect your overall financial situation in retirement. For instance, there are sneaky Social Security tax exemptions you could be missing out on for nothing but lack of knowledge. As per the Social Security Administration, in 2024, there were close to 68 million Americans accessing Social Security, with around $1.5 trillion in benefits paid out among retirees, workers with disabilities, and living beneficiaries. As of June 30, 2024, 90% of Americans over 65 years old were receiving their benefits — typically between $1,508 to $1,908 per month — which was the average equivalent of 30% of their income.

Considering Social Security averages out to almost a third of income for beneficiaries, it might shock you to know that so many of us know so little about it. As per a 2024 MassMutual survey, 41% of Americans who participated in a quiz about Social Security were given F grades, scoring 54% or lower. Meanwhile, a fifth of Americans scored a not-so-great 62% D grade. This is why Social Security should matter to younger Americans and older generations. To help keep you informed, here are some essential social security facts all American citizens should know.

Let's start with why Social Security is important. These benefits were initiated and signed into law by President Franklin D. Roosevelt on August 14, 1935, mainly to provide extra financial security for the elderly and disabled workers through worker funded contributions into a joint fund. Prior to this, states were given grants by the federal government for state welfare programs. The perceived advantage of the American worker paying into their own social security benefits was that state sponsored social insurance programs could eventually be phased out once laborers had contributed enough into the system for it to become self-sufficient. It's since become the standard financial support system for the American workforce and their dependents.

Social Security is about more than retirement, with, according to the Center on Budget and Policy Priorities, one in five recipients receiving disability benefits. Laborers also earn life insurance, with the average young worker with a partner and two children having the equivalent of $948,000 worth of life insurance protection in 2023. More than 5.7 million kids received some form of benefit from Social Security by being dependents of disabled, deceased, or retired laborers, or living with parents or relatives who received the benefit. This is just one way Social Security can provide extra support for families. Social Security also helped bring 1.2 million children in 2022, and almost 40% of adults 65 years of age and older in 2023, out of poverty.

You can begin receiving your benefits at 62 years old, however, the earlier you take benefits, the lower your benefits will be. Although the average Social Security benefits for 62 year-olds may surprise you, full retirement age is 67 years old in the U.S. — more on this later. You still have the option of holding back on receiving benefits until age 70, at which point you can really max out your monthly benefits with delayed retirement credits. You earn credits every year you work and must have 40 credits to be eligible for Social Security. Delayed retirement credits are a retroactive payment you are only eligible for once you reach full retirement, but you won't get them for any time further than 6 months in the past. 

How much extra you get depends on your date of birth and when you choose to receive your benefits. These increased rates range from 5.5% to 8%, but if you plan on deferring your benefits until full retirement, be sure to register for just Medicare when you're 65 years old since Medicare may cost you more the longer you wait. This 2025 Social Security adjustment is affecting Medicare already, so there's no point in increasing your costs further. Social Security underwent 3 changes this year that affects retirees, and one of them is that full retirement comes at 66 years and 10 months.

Applying for Social Security should start with an understanding of what you need to apply successfully. We've already discussed the first part of that, which is when and if you're eligible to receive the benefits. As previously mentioned, this will include factors like your planned age of retirement, whether your work has been impacted by disability or illness, deceased spouses or, in the case of children, parents, and your ability to manage daily needs like food, shelter, and clothing. Checking your eligibility should take less than 10 minutes. Next, the Social Security Administration can give you an estimate of how much you and your family are eligible to receive by logging into your online Social Security account. The added benefit of this is you can adjust your estimated future earnings to play with the calculations, which assumes that you know the age at which you should reach your financial peak.

Be aware of the impact of claiming Medicare at 65 years old, with the understanding that claiming medical insurance through Social Security will come at a cost that will be taken from your benefits. Understand the tax implications of your benefit payments, particularly if your total income amounts to more than $25,000 per year as an individual or $32,000 per year if filing with a spouse. Also, if you work in government, military, or other careers, understand how your benefits may be calculated differently so there are no surprises. Finally, keep track of your annual earnings.

In order to get your Social Security benefits, you'll have to pay into them first. This is primarily accomplished by taxing your paycheck under the Federal Insurance Contributions Act (FICA) tax. As of 2023, employees contribute 6.2% of their wages — employers kick in another 6.2% for a total 12.4% on each dollar earned — up to an annual maximum earnings of $168,600 for 2024. Any amount you earn after that however, will only face taxes for Medicare or income. Over a lifetime, these contributions add up significantly. As a result, the American average worker will pay hundreds of thousands of dollars into the system, though exactly how much will vary by income and career length. According to Free the Facts for example, a worker earning median wages throughout their career might contribute between $367,000 in total, and get somewhere around $383,000 in retirement. However, higher earners in the $100,000 plus tax bracket may contribute, say, $588,000 over their career, but will hit their maximum cap sooner, limiting their lifetime contributions to around $508,000.

Recent legislation, such as the COLA Act last signed by President Biden in January 2025, raised Social Security benefits to address inflation. Here's what the new COLA for Social Security benefits are for 2025. Still, since this increase is funded by current workers' payroll taxes, it has mainly Gen Zers and Millennials asking, "will Social Security benefits run out?" — highlighting the system's reliance on ongoing contributions.

According to a benefits calculator provided by the Social Security administration, if you were retiring mid-year 2025 at 62 years old, you could expect a monthly payment of $1,950 per month, or $23,400 per year. At this age, your maximum benefit would only be $2,831. By comparison, waiting until full retirement — typically between 66 to 67 years old — would result in no deduction to your benefit and a potential maximum monthly payout of $4,018, or $48,216 per year. This demonstrates how, just by waiting five years longer until full retirement, you could earn twice as much in Social Security benefits than at age 62. Finally, holding off on your benefits until 70 years of age will not only save you any deductions, but also allow you a maximum potential benefit of $5,108, or $61,296 per year. Looking at the difference in these numbers, it should be easy to understand why waiting until at least full retirement to claim your benefits is one of our Social Security rules that can drastically increase your monthly benefits. 

The short answer is, yes, it is. First, you'll need to understand what Supplemental Security Income (SSI) is. SSI is financial support provided to workers who have minimal or no income. If you're financially strapped, under 65 years old, have a disability, or suffer specifically from blindness, you would be eligible to receive this benefit. While not everything is considered a disability, the Social Security Administration provides a list of 14 disabilities that qualify for this support, and there were three big changes made to SSI in 2024 that made it a little easier to qualify. If you're 65 years old or older, the disability qualification is waived so long as you still fall under financial hardship.

There are currently 2.5 million Americans receiving both Social Security and SSI, which is paid out to adults and children. In 2025, if your total income, including Social Security, is equal to less than $987 per month, you could qualify to also receive SSI. This also assumes you own less than $2,000 in liquid assets as an individual, or $3,000 as a married couple, including self-employment, pensions, or veteran's benefits. 

In order to pause your benefits, you first need to ensure you're at least full retirement age at the time of your request. If you were born between 1945 and 1956, that's 66 years old, or 67 years old if you were born in 1962 or afterward. However, you also can't have reached 70 years of age. If you're eligible, you can request that your benefits be suspended and earn credits for every month they're delayed. Just be aware that your payment will restart once you're 70 years old. It's also important to note that Social Security benefits are paid out a month after they're due, so if you request that your August benefits be paused on August 1st, you'll receive that August benefit in September before the suspension takes effect. Now that you know how to pause your benefits, you'll want to think about what could happen to your Social Security benefits if you unretire, and be sure of all the implications of that decision. 

After the last slide, let's go into one of those major implications. It's possible to make serious mistakes that could cost you your Social Security. While generally something everyone should seek to avoid, being detained or imprisoned for longer than 30 consecutive days can get your benefits suspended. While your spouse or dependents may still receive your benefits, and your benefits could be suspended after your release, this is a situation to avoid. Also, being incarcerated a year or longer will trigger the termination of your benefits.

If you're an individual receiving disability, un-retiring yourself and earning $1,620 or more — $2,700 or more if you're blind — that's considered Substantial Gainful Activity. This means you make too much money to receive disability. The flip side of that is, if you're no longer considered disabled because your medical condition improves, your disability can be terminated in the same month there's evidence of the improvement. You'll be notified of the change in writing and may be eligible for continued payments if you're enrolled in some form of rehab.

While there is an upside to receiving spousal benefits versus your own Social Security benefits, it also comes with risk, particularly if you divorce that partner. If you're at least 62 years old but divorced from a spouse whose benefits you were receiving, but to whom you were married to for at least 10 years, you may still claim eligibility for benefits. However, if you remarry, you can say good-bye to those benefits.

There's a method to the math where Social Security benefits are concerned. The administration relies on average indexed monthly earnings (AIME) to help determine a 35-year earning average, then calculates adjusted wages — sorting the highest earning years from the number of years worked — before dividing that total by the total months in work years. They figure out the AIME by rounding down to the nearest dollar. The Administration then divides the national average wage index by the national average wage index for every year prior to their age of eligibility — less two years — and multiplies that ratio by those earnings. Then a calculation using AIME and the total index amount to figure out your primary insurance amount (PIA) for your eligible year.

PIA takes into consideration annual changes to dollar amounts in the formula — referred to as bend points — which are affected by changes to the national average wage index. The Social Security Administration provides a table of bend points from 1974 all the way up to 2025, displaying the PIA formula for workers eligible to claim benefits this year as $1,226 and $7,391.

By this point, it would be fair to assume the optimal time to start receiving Social Security would obviously be at 70 years old. It's hard to argue when you look at the benefits, which, according to Charles Schwab, is the difference between 70% of your primary insurance amount (PIA) — if you claim benefits at 62 years old — versus the equivalent of 124% if you defer until 70 years of age. However, it's also fair to argue a one size fits all approach where retirement is concerned may not be the best one, especially if you find yourself in a higher income bracket and afford to take earlier retirement. Things to consider include whether an honest accounting of your assets, life expectancy, and cash on hand. 

While you might assume claiming earlier because you're healthy and in a better financial position makes sense, you should still think twice about retiring early if you want to avoid leaving money on the table. It actually makes more sense to claim your Social Security earlier if you're on the opposite end of the spectrum. If you're in poor health with low life expectancy, living through financial hardship, or have a spouse with a higher income who can wait to claim their benefits, these are valid reasons to receive benefits early. Maybe a better question to ask is what's the best age to set up your social security to ensure the most benefits, since everyone's situation is different.

Many people dream of retiring and spending their days lounging on a beach abroad. If that's the case for you, you don't have to worry about losing access to your Social Security benefits. According to the Social Security Administration, there are 760,000 Americans living abroad claiming $7.5 billion worth of benefits. A payments abroad screening tool on the Social Security Administration site provides information about what countries you can still access your benefits in, whether limited or indefinitely, as well as what restrictions may lay in store for you. You can also find out where you can have your benefits delivered by direct deposit, and contact information for their Office of Earnings and International Operations.

If you collect benefits abroad, the Social Security Administration will send you a questionnaire every two years to help them, and you know, recognize if you are in any danger of losing your eligibility to claim benefits.