Social Security & You

When it comes to Social Security retirement benefits, your decision shouldn’t be based on “one-size-fits-all” assumptions. Your age, marital status, health, and financial needs are all important considerations.

How You Qualify

If you work and pay taxes into Social Security, you may already know that this tax is withheld from your salary.

Social Security taxes are part of the Federal Insurance Contributions Act (FICA) tax. This federal payroll (or employment) tax is paid equally by many (but not all) employers and their employees. If you are self-employed, this tax is paid entirely by you. FICA taxes are used to fund Social Security and Medicare benefits.

Eligibility for Social Security retirement benefits is determined by the Social Security retirement credits you have accumulated over your working life and by your “full retirement age.”

Social Security Retirement Credits

During your working years, you earn “credits” toward your Social Security benefits. The number of credits required to receive Social Security retirement benefits depends on when you were born. Anyone born in 1929 or later must have 40 credits (10 years of work) to qualify. 1

Social Security only pays retirement benefits if you have accumulated the required number of credits. If you stop working before you have enough credits to qualify for benefits, the credits you have earned will remain on your Social Security record. If you return to work later on, you can earn more credits.

Getting ready to retire?
Learn about Social Security retirement benefits.
Learn about Medicare.
Learn about making decisions on retirement.

72% of people do not know that Social Security periodically adjusts for inflation.

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The amount you contribute and how long you work determines how much you get

Know your full retirement age

Full retirement age is the age at which you are entitled to receive full Social Security retirement benefits. Full retirement age is based on the year you were born.

Your “primary insurance amount”

Your primary insurance amount – or PIA – is the benefit you would receive if you begin receiving retirement benefits at your full retirement age. If you file for benefits before your full retirement age, your benefits will be reduced.2 When you file for benefits after full retirement age your benefits will be increased.

Filing for benefits

Social Security filing strategies for:
Singles
Young married couples
Married couples
Divorced spouses
Surviving spouses

 

The Social Security Administration website at http://www.ssa.gov provides a wealth of information on Social Security retirement benefits. It’s also where you can create your own “My Social Security” page to securely view your earnings history and the estimated benefits you may receive at different filing ages.

The age at which you begin receiving benefits is one of the most important factors affecting the amount of your monthly benefit.

This chart shows the effects that claiming age has on a hypothetical monthly Social Security benefit of $1,000; it assumes a full retirement age (FRA) of 66. The chart shows that when benefits are claimed:

  • At full retirement age – the full monthly benefit of $1,000 is paid.
  • Before full retirement age – the monthly benefit gradually reduces. If benefits are claimed at age 62, only $750 would be paid each month – a 25% decrease.
  • After full retirement age – the monthly benefit increases for every year claiming is delayed, up until age 70. In this case, the monthly benefit at age 70 has increased to $1,320 – a 32% increase. This increase is due to delayed retirement credits.

Delayed retirement credits can provide a powerful multiplier of benefits over your lifetime. For each year after full retirement age that you delay taking benefits, delayed retirement credits increase your monthly benefit amount. The percentage of increase depends on the year you were born. If you were born in 1943 or later, your benefit increases by 8% each year until you reach age 70. After that, no additional delayed retirement credits are earned.3 If you were born after 1954, the potential delayed retirement credits gradually reduce as your full retirement age increases. If your full retirement age is 67, delayed retirement credits can add up to a maximum increase of 24%.

IRA

Traditional and Roth IRAs are available, offering different tax advantages. Investors may select from a range of investment choices.

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Annuities

Annuities can be a powerful way to save for retirement. Your savings grow tax-deferred and can be converted to provide guaranteed lifetime income.

Learn More

1 Source: Social Security Administration Benefits Planner: Retirement Credits at http://www.ssa.gov/retire2/credits.htm

2 Source: Social Security Administration, Retirement Planner: Full Retirement Age, http://www.socialsecurity.gov/retire2/retirechart.htm

3 Source: Social Security Administration, http://www.ssa.gov/pubs/EN-05-10147.pdf

4 Final decisions about Social Security filing strategies always rest with you and should always be based on your specific needs and health considerations. It is important to acquire as much information as possible in order to make an informed Social Security claiming decision because one year after the Social Security claiming decision is made, the options for change are extremely limited. The Social Security program was created by an Act of Congress. It is subject to change. In the past, Congress has made changes to the law which has had an impact on Social Security benefits. Congress can make changes to the law at any time, which might impact benefits in the future.

The information provided is not written or intended as specific tax or legal advice. MassMutual, its employees and representatives are not authorized to give tax or legal advice. Individuals are encouraged to seek advice from their own tax or legal counsel.