What is Social Security?

Social Security (SS) is a retirement program that was started in the 1930s. Today, because of SS, millions of retirees are able to live comfortably.

The SS taxes (6.2% as employee or 12.4% as self-employed) that you pay today are used to pay the retired individuals. The SS taxes that you pay today are not kept in a saving account or a trust under your name so that when you retire you receive that money as benefits in your retirement.

Eligibility Requirement

In order to be eligible to receive SS you may need to have earned 40 credits while in the workforce. Each year you can earn a maximum of 4 credits. Each $1,360 you earn is equal to 1 credit. So, after earning $5,440 in a single year you will have earned your maximum credits for that year.

What is the Earliest Age to Start Receiving SS Benefits

Age 62.

How Much Benefits Are Paid Out

The amount of SS benefit you receive will vary depending on your 1) past earnings and 2) when you start withdrawing your benefits. However, your maximum SS benefit as of 2019 for a worker that retires at a Full Retirement Age maybe $2,861/month or $34,332/year.

What is the Full Retirement Age

The current full retirement age is 67 for individual who were born after 1960.

Early Withdrawal Penalty

You can retire early and choose to receive SS benefits earlier. However, for each month you retire prior to the full retirement age you could lose 0.5% of your SS benefits. That means losing up to 6% of SS benefits for each early year of retirement. That could be a lot of money for many individuals, thus why many individuals choose to wait until full retirement age before applying for SS benefits.

When are SS Benefits Taxed

If you file your taxes as an individual and have total income over $25,000, you may have to pay taxes on your benefits.

If you file your taxes as a joint return and have total income over $32,000, you may have to pay taxes on your benefits.

Can You Receive SS Benefits and Continue to Work

Yes, however, for each two dollars you earn, your SS benefits are reduced by one dollar if you retire prior to full retirement age above the annual limit. 2019 annual limit is $17,640.

If you have any questions related to SS Benefits, please contact us at mail@hudacpa.com or call us at 832-834-5555.