How Social Security Works

Updated: Aug 2, 2019

To qualify for Social Security, you need to accumulate 40 work credits, which works out to about 10 years of work. Once you've accumulated the credits you need, you can begin collecting benefits as young as age 62 or wait as late as age 70. You'll only receive 100% of your benefit amount, however, if you claim at your full retirement age. If you claim earlier than that, your benefit check will be reduced, but if you claim later than that, you'll get a bonus equal to 8% per year you delay.


Social Security uses a complex calculation to figure out how much you'll receive in benefits at full retirement age, but the program is designed to replace roughly 40% of your preretirement income.


The calculation begins with adjusting your highest-earning 35 years of employment for inflation to come up with your average indexed monthly earnings (AIME). Then, Social Security reduces your AIME at certain income levels called bend points to come up with your primary insurance amount. This is the amount you can receive if you claim at full retirement age.


How Social Security Works

If you claim early, your primary insurance amount will be reduced by five-ninths of 1% per month for the first 36 months you claim early and by five-twelfths of 1% for every additional month you claim early. If you wait to claim until after full retirement age, then you'll get delayed retirement credits that increase your payout by two-thirds of 1% for every month you delay, up to age 70.

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