Social Security Basics

The material below is for informational purposes only and may not apply to your specific situation. Ohio Laborers Benefits are not affiliated with the Social Security Administration. For information and questions about your Social Security benefits, contact the Social Security Administration at 1-800-772-1213.

The first Social Security check went to Ida May Fuller in 1940. She continued receiving checks until she passed away in 1975 at the age of 100. Social Security pays monthly benefits to retired Americans. During our working lives, we pay into the Social Security system. In return, we receive an inflation-adjusted retirement benefit for the rest of our lives.

According to AARP, Social Security replaces an average of about 40% of pre-retirement income. It also provides benefits for spouses, widows, disabled individuals, and certain people with very low income. You generally have to work at least 10 years to be eligible for retirement benefits. Social Security bases your benefit on your highest 35 years of earnings, averaging at about $1,400 a month. You being receiving your full retirement benefit between ages 66-67, depending on when you were born.

You can start collecting Social Security at age 62, but your monthly benefit will be permanently reduced. Or you can delay retirement up to age 70 to increase your monthly payment. When you claim benefits, Social Security will compare your benefit with the benefit you are eligible for as a spouse, ex-spouse, or survivor and give you the larger of the two amounts. 

Full Retirement Age

  • People born between 1943-1954: 66
  • People born between 1955-1959:  66 + 2 months each year until 1960
  • People born in 1960 or later: 67
For example, if someone had a $1,000 monthly benefits, their early retirement monthly benefits would be $750, and their late retirement at age 70 would be $1,320.

How marriage and Divorce Can Affect your Social Security

Marriage

If you are married (or were for at least 10 years), you may be eligible for spousal benefits. In order to claim spousal benefits, you must be 62 years old. Your spouse must file for benefits before you can collect on his or her record. If your retirement benefits would be equal to or less than half of your spouse’s retirement benefit, then you get the larger amount.
 
For example:
  • Your spouse’s retirement benefits: $1,500/month
  • Your own retirement benefit: $600/month
  • Spousal benefit: $750/month (half of your spouse’s benefit)
  • In this case, Social Security would pay you $750, since the amount is larger than your own retired worker benefit.

The decision on when to claim benefits for both spouses can have a significant impact on retirement income. Collecting Social Security early will reduce the spousal benefits, if the spouse should retire early as well. Spousal benefits are always based on the primary earner’s full retirement benefits. If the primary earner should retire early and the spouse does not claim early, the spouse’s benefit will not change.

For example: Joe (62) and Linda (60) are married. Joe is the primary earner. If Joe decides to collect his Social Security benefits at age 62, his benefits will be permanently reduced. If Linda starts collecting when she turns age 62, her spousal benefit will be 35% of Joe’s benefit, instead of 50% if she waited until her full retirement. If Joe claims early, it will not change the benefit Linda collects as long as she doesn’t claim early.

Divorce

Divorce can impact your spousal benefits as well. If your marriage lasted at least 10 years, you are still eligible for the spousal benefit – if your own retired worker benefit would be less or you haven’t remarried.

For example:
  • Your ex-spouse’s retirement benefits: $2,000 monthly
  • Your own retirement benefit: $900 monthly
  • Spousal benefit: $1,000 a monthly (half of your ex-spouse’s benefit)

The 10-year rule does not apply if you’re a survivor caring for a child under age 16 or a disabled child who’s receiving benefits based on your deceased ex’s work record. However, the child has to be your deceased ex-spouse’s natural or legally adopted child in order for the rule to be waived.

Remarrying

You can receive a spousal benefit if your ex remarries; but if you remarry you may not be eligible for a benefit from your ex-spouse, though you may become eligible for a benefit on your new spouse’s record. However, if your later marriage ends in death, divorce or annulment, you may again be eligible for a spousal benefit based on your ex’s work record.

Disability Benefit

Social Security pays disability benefits, too. The program is for people who can’t work for medical reasons. The definition of disability is very strict. Typically, your disability must prevent you from working at all. 

Survivor Benefit

A survivor can begin collecting the deceased spouse’s full retirement benefit at age 60. The benefits kick in immediately if the survivor is caring for children under the age of 16. Disabled survivors can start collecting survivor benefits beginning at age 50. The majority of surviving spouses in the U.S. are women, and they face a higher risk of poverty in retirement. It is very important that couples plan their Social Security claiming  with care. 

There are several variables that affect the amount received for survival benefits. If the primary earner dies before he or she starts collecting Social Security, the survivor benefits will be based on the primary earner’s Social Security at full retirement age. The amount the spouse receives depends on her age when she collects them. 

  • If the spouse is at full retirement age, he or she will collect 100% of the benefit.
  • If the spouse is between the age of 60 and their full retirement age (66 or 67), the survivor benefit  will be 71.5% – 99% of decease’s benefit. 
  • If the spouse is disabled, he or she can collect the full benefit at age 60 or 71.5% of the benefit between ages 50-59.

When to Claim Social Security

You can start claiming Social Security at age 62, although claiming early permanently reduces your benefits. Social Security was never designed to be the sole retirement income for a retiree. Delaying retirement increases your monthly benefits. If you don’t have a pension or substantial personal savings by the time you start thinking about retirement, then delaying retirement may be the right decision for you. 

Your own life circumstances will factor into when you’ll be able to retire. If you retire early, but have personal savings, you could delay claiming your Social Security benefit. Every year you delay until age 70, your benefit grows 8%. If your full retirement age is 66, delaying four years could increase your benefit by 32%.

pen and calculator

Taxation of Social Security Benefits

For millions of retired Americans, Social Security makes up the largest chunk of their retirement income. While the majority do not pay federal income tax on their benefits, if you have income over a certain amount, your benefits could be taxable. This usually happens only if you have other substantial income in addition to your benefits (such as wages, self-employment, interest, dividends and other taxable income that must be reported on your tax return).

If this “provisional” income exceeds a certain amount, your Social Security benefits are taxable. If your income exceeds the lower threshold, up to 50% of your Social Security benefits could be taxable. If your income exceeds the higher threshold, up to 85% of your Social Security benefit could be taxable. 

So what counts as “Provisional” income? The income that you report on your tax return are the basis for applying taxes on your benefits. Provisional income includes all sources of taxable income, such as pensions, interest and dividends, tax-exempt interest, and wages. Provisional income also includes one half of your Social Security benefits.

Each year, retirees will receive a Social Security benefit statement (Form SSA-1099) showing the benefits you received in the prior year. Use it when you complete your federal tax return to find out if any of your benefits are taxable. If your income puts you over a threshold, you may want to pay the tax throughout the year. If you wait until you file your return, you may pay a penalty in addition to the money you owe.

You can have taxes withheld from your Social Security benefits by filing Form W-4V with the Social Security Administration. Or, you can make quarterly estimated payments to the IRS using Form 1040-ES. To help figure out if your Social Security Benefits may be taxable, the IRS has the worksheet Notice 703

An example of a single filer that will not owe federal taxes.

Income Source

Pension

Interest income

Half of Social Security benefit

Total income

Annual Income

$15,000

$1,500

$7,500

$24,000

An additional $2,000 in non-Social Security income for that year would have pushed this filer over the lower income threshold, making a portion of his Social Security benefits taxable. 

An example of a married couple filing jointly who exceeds the lower threshold, making a portion of their Social Security benefits subject to income taxes. 

Income Source

Pension

Wages

Half of Social Security 

Total income

Husband’s Annual Income

$11,000

0

$7,000

$18,000

Wife’s Annual Income

0

$11,000

6,000

$17,000

Couple’s Total Income:  $35,000

Retirement Estimates

The Social Security Administration provides people with a Retirement Estimator. This calculator gives estimates based on your actual Social Security earnings record. However, what the Retirement Estimator provides is just an estimate and cannot be used to determine/estimate any Social Security Leveling options with the Pension Fund. It will not provide your actual benefit amount and may differ from what you actually receive when you apply for Social Security benefits. The Retirement Estimator is a great resource when you want to get an idea on where you stand on your Social Security benefit, and it can help you plan for your retirement. 

When you are ready to retire and you want to know your benefit options, you will want to create a my Social Security account, if you haven’t done so already. This is where you will be able to obtain your most recent Social Security Estimate statement. You can also visit your local Social Security Administration office to get a copy of your Social Security Estimate statement.  This statement will be used to best estimate your Social Security Leveling, if that is a Pension Benefit Payment option you are interested in. Ohio Laborers Benefits recommends you meet with a Benefits Counselor. A representative from our office will meet with you at your Local hall and discuss your retirement options.

Resources

Links to various resources on the topics discuss on this page. 

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