Social Security Retirement Basics

Social Security is the publicly financed system established in 1935 that provides monthly retirement income to 48 million Americans, including 35 million retirees, 6 million disabled adults, and 7 million widows and orphans.


In effect, Social Security functions as a national income insurance program, pooling risks together and providing minimum income support. The system is “social” in that nearly every American contributes to it and in turn is eligible to receive benefits. The system provides “security” by guaranteeing retirees a minimum, inflation-adjusted income for life, as well as monthly income for those who are disabled and unable to work, and those who have lost a spouse or parent.

Social Security was not intended to be the sole source of support for anyone, but merely to supplement personal savings and pensions. Nonetheless for two-thirds of retirees, Social Security is the main source of income. For one-third of retirees, Social Security provides more than 90 percent of their income.

How are Benefits Calculated?

Social Security retirement benefits are calculated based on your highest 35 years of earnings covered by Social Security and adjusts them to account for inflation over those years. The earnings portion of the calculation figures far more heavily into the equation than the number of years you put into the system. In general, the higher your income the higher your monthly benefit. The formula is progressive however,so the less you earn, the more of your earnings you can expect to replace, in percentage terms, through Social Security.

When Can I Qualify For Benefits?

For retired workers and their dependents the normal retirement age has been age 65. However, under current law, the full retirement age is gradually increasing beginning with retirees born in 1938, and will be age 67 for those born in 1960 or later.

Early Retirement

You can get Social Security retirement benefits as early as age 62. but if you retire early before your full retirement age, your benefits will be permanently reduced, based on your age. For example, if you retire at age 62 your benefit would be about 20 percent lower than what it would be if you waited until you reach full retirement age.

About half of workers do take benefits at this age.



Full Social Security Benefits.

Congress modified Social Security benefits in 1983. Now, if you were born after 1937, you won't receive full Social Security benefits at age 65. For full Social Security benefits, you must now wait until you reach the following age:

Year of Birth  Full Retirement Age

1938             65 and 2 months

1939             65 and 4 months

1940             65 and 6 months

1941             65 and 8 months

1942             65 and 10 months

1943-1954    66

1955             66 and 2 months

1956             66 and 4 months

1957             66 and 6 months

1958             66 and 8 months

1959             66 and 10 months

1960 or later 67


Taxation of Social Security

Your Social Security benefits, either disability or retirement-may be taxable.

Each year in January or February, you should get a statement from the Social Security Administration called a "Form SSA-1099". The amount reported in Box 5 of that form is the amount you will use to determine if any benefits are taxable.

If you get more than one form, add the amounts in Box 5 of each form.

If you receive a "Form RRB-1099" this means your Social Security equivalent is being paid by the Railroad Retirement Board. You will also use Box 5 of the form in calculating benefits.

Here are the steps for determining taxability:

  1. Add up your total income. This includes taxable pensions, wages from part-time or full-time employment, interest, dividends, other taxable income and any tax-exempt interest.
  2. Add 50% of Social Security benefits.

This amount is called your provisional income or base income.

Under $25,000(Single Taxpayer) Social Security benefits are tax-free.

Under $32,000 (Married Filing Jointly) Social Security benefits are tax-free.

$25,000-$34,000 (Single Taxpayer) 50% of your social Security benefits are added to other income and taxed at regular rates.

$32,000-$44,000 (Married Filing Jointly) 50% of your Social Security benefits are added to other income and taxed at regular tax rates.

Above $34,000 (Single Taxpayer) 85%

Above $44,000 (Married Filing Jointly) 85%

Essentially the higher your non-Social Security income, the more of your Social Security benefits that are taxable. At the top end, each additional dollar of non-Social Security income (such as investment or pension income) can expose an additional 85 cents of Social Security benefits to federal taxation. You might see your state tax rise as well.

For additional information on the taxability of Social Security benefits, see IRS Publication 915, Social Security and Equivalent Railroad Retirement Benefits.