Social Security Employment Tax
While you are working, you and your employer each pay 6.2%
(7.65% each including Medicare). Social Security taxes are paid
on the first $128,400 of income (2018).

Minimum Eligibility Requirements
In order to qualify for Social Security retirement benefits on
your own record, you need to earn a minimum of 40 credits,
equivalent to ten years of Social Security-eligible work history.
You accrue one credit for each $1,320 in earnings (2018), up to a
maximum of 4 credits per year.

How Benefits Are Calculated
Your Social Security benefit at Full Retirement Age (FRA) is
calculated based upon indexed (inflation-adjusted) earnings
of your highest 35 years, subject to annual income caps (e.g.,
$128,400 in 2018). The estimated average monthly Social
Security benefit of a retired worker in January 2018 is $1,404
($16,848/year) after a 2.0% Cost of Living Adjustment (COLA).
The average total for couples who are both are receiving benefits
is $2,340 ($28,080/year). The maximum Social Security benefit
for a worker retiring at Full Retirement Age in 2018 is $2,788
($33,456/year).

How to Find Out Your Own Benefit Information
After going back and forth on the issue over the last several
years, the Social Security Administration announced in January
2017 that, in a cost-cutting effort, they would stop physically
mailing Social Security statements to all individuals. However, the
Social Security website allows you to obtain your Social Security
statement online by signing up for a mySocial Security account
or estimate benefits using one of several tools.
MySocialSecurity: https://www.ssa.gov/myaccount
Tools: https://www.ssa.gov/planners/benefitcalculators.html

Taxes on Benefits
Depending on your income in retirement, a portion of your Social
Security benefit payment may be subject to taxes. The table
below shows the percentage of your Social Security benefit that
could be subject to taxation, depending on income.

Spousal Benefits
If you have never worked, or if you have worked but your own
benefit amounts to less than half of your spouse’s Full Retirement
Age benefit, you can receive a spousal benefit. Spousal benefits
are equivalent to one-half of your spouse’s Full Retirement Age
benefit at your own FRA, or less if taken prior to your own FRA
(e.g., as early as age 62). Spousal benefits do not go up or down
based on when the primary Social Security recipient files for
benefits, but the primary recipient must file for benefits in order
for the spouse to receive a spousal benefit. Spousal benefits do
not continue to increase after you reach Full Retirement Age. The
table below shows the spousal benefit by percentage, depending
on when benefits are taken.

Spousal Benefits for Divorcees
You may qualify for a spousal benefit from a previous spouse.
In order to qualify, you must have been married for 10 or more
years, currently be unmarried, and age 62 or older. The percent
of the spousal benefit is the same as for married spouses (see
table above). As long as you have been divorced for at least
two years, you can receive spousal benefits if your ex-spouse
is eligible to receive benefits (regardless of whether they have
actually filed for benefits or not).

Survivor Benefits
Surviving spouses, surviving ex-spouses, and other family
members may qualify for varying levels of Social Security
survivor benefits when the primary recipient dies. Most notably,
among married spouses, the higher of the two Social Security
benefits lives on when one spouse passes away.

Cost of Living Adjustment (COLA)
Social Security payments go up over time in order to keep
up with inflation. COLAs are determined annually based on
increases in the Consumer Price Index for Urban Wage Earners
and Clerical Workers (CPI-W). The following table shows the
Social Security cost of living adjustment for each of the last 15
years.

Early or Delayed Social Security Benefits
You can choose to begin benefits prior to your Full Retirement
Age (as early as age 62) and receive a reduced Social Security
benefit amount. You can also choose to delay the start of benefits
in exchange for a higher benefit amount. For example, taking
benefi ts at age 62 results in monthly benefit payments that
are 25% – 30% lower than what they would have been at Full
Retirement Age, but allows you to receive benefits 4-5 years
sooner. Likewise, waiting until at age 70 to file for benefits results
in payments that are 76% – 77% higher than at age 62 and 24% –
32% higher than at Full Retirement Age. Of course, the drawback
of delaying Social Security is that it means forgoing benefit
payments in the interim. The following table shows the impact of
taking benefits early or late for people with a Full Retirement Age
of 66 or 67.

Percent of Full Retirement Age Benefit

Taking Early Benefits While Continuing to Work
If you take benefits prior to Full Retirement Age and continue to
work, your benefits may be reduced. For example, benefits are
reduced by $1 for every $2 in earnings above $17,040 in 2018.
Alternatively, in the year you reach Full Retirement Age, benefits
are reduced by $1 for every $3 you earn over $45,360 (for 2018),
until the month you reach FRA. Benefits are not reduced once
you reach FRA.

Recent Legislation
The Tax Cuts and Jobs Act of 2017 did not have a direct impact
on the Social Security system. However, the Bipartisan Budget
Act of 2015 put an end to “File and Suspend” and “Deemed
Filing” strategies. The closure of the “Deemed Filing” loophole
only affects individuals who reached age 62 after December 31,
2015. Therefore, a limited portion of the population can currently
take advantage of the deemed filing loophole (i.e., filing for and
receiving spousal benefits while allowing benefits on your own
work record continue to grow).

Potential Future Legislation
According to the Congressional Budget Office’s (CBO), outlays
have exceeded revenues each year, beginning in 2010. Based on
the current trajectory, the balance of the retirement portion of the
Social Security trust fund is projected to be exhausted in 2031.
Change is inevitable to ensure the continuation of Social Security
benefi ts. Given the passing of the recent Tax Cuts and Jobs
Act, many speculate that reforms for Social Security and other
social programs may be next on the docket. Future changes to
Social Security could include pushing back the retirement age,
reducing benefits/benefit caps, raising taxes, increasing eligibility
requirements, means testing, and others.

When to Take Social Security
While the Bipartisan Budget Act of 2015 closed glaring Social
Security loopholes, there are still ways to thoughtfully strategize
about how and when to take Social Security benefits. For
example, given the trade-off that exists in waiting, most advisors
suggest waiting until Full Retirement Age to take benefits. If
nothing else, waiting provides “longevity insurance” in the event
you live beyond life expectancy. For married couples, given that
the higher benefit lives on when one spouse passes away, many
couples choose to have one spouse take benefits earlier, while
the second delays benefits. This way the couple receives some
benefits at an early age, while locking in a higher benefit that will
carry through their joint life expectancy.

How to Apply
You can apply online, by phone, or in person at your local Social
Security offi ce (appointments available). In order to prepare,
gather the following information: date and place of birth, marriage
and divorce record (names, dates of birth, Social Security
numbers, dates/places of marriage), names and dates of birth
for minor or disabled children, US military service record, recent
employment history, and direct deposit banking information.