These are the four most important things retirees need to know about Social Security.
You could read for a very long time if I tried everything Retirees need to know about Social Security. Or, more likely, they would throw in the towel and do something else.
But I won’t try to cover everything possible about Social Security. Instead, here are four particularly important things about Social Security that all retirees need to know in 2024.
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1. How much your social security benefits will be
Perhaps the most important thing retirees should know about Social Security is the amount of their benefits. Of course, the exact amount of benefits varies from person to person. To get an estimate of your Social Security benefits, visit the Social Security Administration’s website.
While I can’t tell you how much you’ll get from Social Security, I can tell you the factors that affect your benefits. The most important factor is your earnings history. The Social Security Administration calculates benefits based on your 35 highest-earning years.
The timing of your retirement is also crucial. The full retirement age (FRA) for anyone born in 1960 or later is 67. If you retire early, your Social Security benefits will be reduced. But if you wait to apply for benefits, you’ll receive delayed retirement credits.
2. How your benefits are taxed
There’s good news and bad news for retirees when it comes to the taxation of their benefits. Let’s start with the good news: Most states don’t tax Social Security benefits. Currently, 40 states don’t tax benefits. The 10 exceptions have tax rules that could still work to your advantage.
Now the bad news: Uncle Sam actually imposes federal taxes on some Social Security benefits. About 40% of welfare recipients have to pay federal income taxes on their benefits. To find out if you’re one of them, check out the table below:
| Method of filing federal tax | Total income | Are social security benefits subject to tax? |
|---|---|---|
| Individual return | NO | |
| $25,000 to $34,000 | Yes – up to 50% of your benefits | |
| > $34,000 | Yes – up to 85% of your benefits | |
| Joint return | NO | |
| $32,000 to $44,000 | Yes – up to 50% of your benefits | |
| > $44,000 | Yes – up to 85% of your benefits | |
| Married, filing separate tax returns | Any amount | Probably yes |
Data source: Social Security Administration.
3. How continuing to work could affect your performance
Can you collect Social Security retirement benefits and still work? Absolutely. However, your benefits could be reduced if you have not yet reached full retirement age.
For 2024, the Social Security Administration will deduct $1 from benefits for every dollar earned over the annual limit of $22,320. The rules change during the year you reach your full retirement age. Your benefits will be reduced by $1 for every dollar earned over $59,520.
There is a silver lining, however. Once you reach your full retirement age, your earnings from continuing to work will no longer reduce your benefits, no matter how much you earn. In addition, the Social Security Administration will recalculate your benefit and refund you the full amount withheld.
4. What does the future of social security look like?
You may have heard that Social Security is going bankrupt. That’s not the case. However, the program’s trust funds will indeed be depleted if nothing changes. Social Security trustees currently project that Social Security’s trust funds will be depleted in 2035. After that, the program will only be able to pay out 83% of benefits.
The most important thing to understand about this bleak future for Social Security is that it can be prevented. If reforms are made to generate additional revenue for the program and/or reduce its expenses, the benefits of current retirees need not be affected.
