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For many retirees, Social Security is a major source of income. Understanding how benefits work helps you decide when to claim and how much tax you might owe.

Who is eligible for retirement benefits?

You earn credits by working and paying Social Security taxes, and you generally need a minimum number of credits to qualify. Your benefit is based on your highest-earning years. You can check your earnings record and estimate your benefit by creating an account at ssa.gov. Reviewing your record for errors is wise, because mistakes can reduce your benefit.

When can I start collecting?

You can generally begin as early as age 62, but your monthly benefit will be permanently reduced. Waiting until your full retirement age gives you the full amount, and waiting even longer, up to age 70, increases it further. Your full retirement age depends on your birth year.

What is the best age to claim?

There is no single answer. Factors include your health, family longevity, other income, whether you are still working and your spouse's situation. Claiming early gives you more payments over time but smaller ones; waiting yields larger payments. A married couple should consider the survivor's benefit as well.

Can I work and collect benefits?

Yes, but if you claim before full retirement age and your earnings exceed an annual limit set by the Social Security Administration, some benefits may be temporarily withheld. After you reach full retirement age, the earnings test no longer applies.

Are benefits taxable?

They can be. Depending on your total income, up to a portion of your benefits may be included in your taxable income. The thresholds are set by law and apply to a measure called combined income. Taking withdrawals from retirement accounts can push more of your benefits into taxable territory, which is why planning the order of withdrawals matters. You can ask for federal tax to be withheld from benefits if you prefer.

What about spouses and survivors?

A spouse may be eligible for a benefit based on the other spouse's record, and a surviving spouse can generally receive the larger of the two benefits. Divorced spouses may also qualify if the marriage lasted long enough.

Does Medicare connect to Social Security?

Most people become eligible for Medicare at age 65, and enrollment rules apply even if you have not started Social Security. See medicare.gov for details.

If you would like help coordinating Social Security with your other retirement income, please contact our firm.