Social Security Retirement Benefits

In order to be entitled to Social Security retirement benefits, a claimant must be (1) fully insured; (2) have attained age 62; (3) have filed an application for old age insurance or have been entitled to disability insurance benefits for the month preceding the month in which the claimant attained retirement age; and (4) must meet the retirement test. An individual who meets all these criteria is entitled to payment of a monthly benefit. How much that benefit will be depends on three primary factors: (1) how much the individual has paid into the Social Security system on an annual basis; (2) how many years the individual has actually paid into the Social Security system; and (3) the individual's actual age when he or she begins to receive a benefit.

An individual who has reached retirement age, i.e., age 62 or above, is entitled to retirement benefits beginning with the first month in which all requirements for entitlement are met. Entitlement to retirement benefits ends with the month before the month in which an individual dies.

The most fundamental criteria for entitlement to old age benefits is your age. If all other criteria are met, early retirement benefits can be claimed at or after age 62. Currently, insured workers born between 1943 and 1954 can claim full retirement benefits at age 66. The retirement age gradually increases by 2 months each year for those born between 1955 and 1959. The full retirement age for those born in 1960 and later is 67.

In order to be eligible for a Social Security retirement benefit, an individual must be "fully insured" which means the wage earner must have paid taxes into the Social Security system for the requisite number of quarters. In general, an individual who has 40 quarters (or ten years) is fully insured.

A covered worker may also file for retirement benefits as early as age 62, but the amount of the benefit will be reduced for each month prior to his or her full retirement date. An individual who accepts early retirement always receives the percentage reduction below the full amount she or he might have received had she or he waited until their full retirement age to receive payments. This reduction in benefits also applies to a dependent spouse who chooses to receive dependent's benefits before full retirement age. If an individual waits to claim a retirement benefit until after his 65th birthday, the monthly benefit is increased by a percentage up until age 69.

An individual can receive Social Security old age benefits and still work as long as his or her income does not exceed the maximum allowable amount. How much the maximum allowable earnings are depends on one's age, and is adjusted annually for cost of living. "Earnings" for purposes of the retirement test, means gross wages from work or net earnings from self employment income only. Income from other sources is not counted. If earnings exceed the allowable amount, Social Security benefits will be reduced. Social Security requires that every beneficiary file an annual earnings report which is used to determine if earnings exceed the allowable amount. For those at their full retirement age, there is no limit on earnings.

Finally, since Social Security is not a needs based program, there is no resource test or non- wage income limit. Thus, income from stocks, bonds or any sources other than wages from a job do not count against a Social Security recipient's benefits.  3/11

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