Like the majority of Americans, you've likely been contributing to Social Security since you started working, and like the majority of Americans, the concept of Social Security may still be unclear.
To start, workers contribute 6.2 percent of their earnings into the Social Security system up to a certain level. Employers pay a matching contribution for each worker. Your Social Security benefits are calculated based on your 35 highest-earning years in the workforce, which are adjusted for inflation. The funds you receive are intended to provide some sort of supplemental retirement income in addition to money you've saved in other accounts.
You must wait until you reach the Social Security Administration's full retirement age, which depends on the year you were born, in order to receive full benefits. You can start receiving partial Social Security benefits as early as age 62. Generally, you can receive Social Security retirement benefits while you're still working, but depending on your age and earnings, your benefits may be reduced.
When Can You Receive Social Security Benefits
|Born before 1938||Born between 1938 and 1959||Born after 1959|
|May receive full benefits at age 65||May receive full benefits after 65 and before 67, depending on your year of birth||May receive full benefits at age 67|
If you do continue working full-time beyond retirement age, you may be able to increase your Social Security benefit, which will be added in automatically from the time you reach full retirement age until you start taking benefits or reach age 70. Some of your Social Security benefits may be taxable, depending on your overall income for the year. If you worked for a federal, state or local government where you didn't pay Social Security taxes, the pension you receive from that agency may reduce any Social Security benefits for which you are qualified. Some or all of your spouse's or widow(er)'s Social Security benefit may be offset if you receive a pension from a job where you didn't pay Social Security taxes.
If your pension is from work where you also paid Social Security taxes, it won't affect your Social Security benefit. Pensions based on work that isn't covered by Social Security (e.g., the federal civil service and some state, local or foreign government systems), however, may reduce the amount of your Social Security benefit.
Connect with a financial advisor to manage your retirement funds, including Social Security benefits.