Today’s question is “I am approaching retirement age, can you explain Social Security retirement benefits?”

I’ll try but it will take a little longer than 2 minutes.

For your convenience, I have divided this topic into 6 sub-questions.

How do I qualify for social security retirement benefits?

To receive Social Security retirement benefits, you must be “fully insured,” which simply means that you have has worked for a long enough time and have put enough money into the system.

As you work, you accrue “credits” at the rate of one credit for each quarter-year you work. To be eligible for retirement benefits, you need 40 credits. Since you can’t earn more than four credits per year, you have to work for at least 10 years to ensure full eligibility. You also have to earn a certain amount of money each quarter to get a credit for that quarter. This amount increases each year to adjust for inflation. In 2013, it is $1,160.

What affects the amount of my social security retirement benefits?

The primary factors that affect the amount of your social security retirement benefits are your lifetime earnings and your retirement age.

Lifetime earnings

Your benefits are based on your earnings over your entire working lifetime. People who earned more will get more back. (However, the system is set up so that lower-income workers will receive a higher percentage of their former wages than higher-income workers.)

Retirement age

You can elect to begin receiving benefits at any age from 62 to 70, with your monthly benefit being higher the longer you wait to begin receiving benefits.

  • Early Retirement. The earliest you can choose to start collecting Social Security retirement is age 62. Drawing benefits at the early retirement age of 62 results in a benefit reduction of approximate 25 percent compared your benefit at full retirement age. The benefits are permanently reduced — that is, they won’t go back up once you reach your full retirement age.

  • Full retirement age. Full retirement age depends on when you were born. For instance, if you were born between 1943 and 1954, you receive full benefits if you retire at age 66. If you were born in 1960 or later, your full retirement age is 67.

  • Delayed retirement. You can wait until as late as age 70 to begin receiving benefits. If you wait, your monthly benefits increase up to 32% compared to your full retirement age benefit.

Here’s an example of the effect of choosing different retirement ages.

Let’s say your full retirement age is 66 and your monthly benefit starting at that age is $1,000. If you choose to start getting benefits at age 62, your monthly benefit will be reduced by 25 percent, to $750, to account for the longer period of time you receive benefits. If you choose to not receive benefits until age 70, you would increase a monthly benefit of $1,320, 32 percent more than you would receive per month if you chose to start getting benefits at full retirement age

Your decision when to begin collecting social security retirement benefits is a personal one that you should consider carefully.

Can I find out in advance the amount of my Social Security retirement benefits?

There are several tools you can use.

If you are a worker and are at least 18 years old and are not receiving Social Security benefits, you can get your personal Social Security Statement online. It provides you with a record of your earnings and gives estimates of what your Social Security benefits would be at different retirement ages. (It also gives an estimate of the disability benefits you could receive if you become severely disabled before retirement, as well as estimates of the survivors benefits Social Security would provide your spouse and eligible family members when you die.) To create an account online to review your Statement, visit www.socialsecurity.gov/myaccount.

You can also use the online Retirement Estimator to get immediate and personalized retirement benefit estimates to help you plan for your retirement. The online Retirement Estimator will let you create “what if” scenarios. You can, for example, change your “stop work” dates or expected future earnings to create and compare different retirement options. For more information, visit www.socialsecurity.gov/estimator.

Can any family members also receive benefits?

If you are getting Social Security retirement benefits, some members of your family also can receive benefits, including:

  • Spouses who are age 62 or older

  • Spouses who are younger than 62, if they are taking care of a child entitled on your record who is younger than age 16 or disabled

  • Former spouses, if they are age 62 or older

  • Children up to age 18, or up to 19 if they are full-time students who have not yet graduated from high school

  • Disabled children, even if they are age 18 or older.

Is my benefit reduced if I work after I begin collecting social security retirement benefits?

If you have reached full retirement age, no. You can earn as much as you want without your social security retirement benefit being reduced. However, before you reach full retirement age, your Social Security benefit is reduced based on the amount you earn.

Are social security retirement benefits taxable?

Yes, depending on your financial situation. About one-third of people who get Social Security have to pay income taxes on their benefits. Whether you must pay taxes on your Social Security and, if so, on what portion of it, depends primarily on your total earnings during the tax year. Consult with your tax adviser.

**This article is designed to provide helpful information that can be read within 2 minutes. It is neither a full explanation of this subject nor legal advice. To learn more, and to get legal advice on which you can rely, contact me or another lawyer.