How Social Security Can Help You Plan for Retirement

Welcome! Social Security wants to help you plan for retirement. Our goal is to give you the Social Security information you need quickly and easily. Our website,, is a valuable resource for information about all of Social Security's programs. This website is a place where, for example, you can get estimates of your future benefits. And you can also handle almost all other Social Security business there, such as applying for retirement, disability, and Medicare benefits. But more about those things later. Right now, let's just focus on Social Security and your retirement plans.

Chapter 1: Social Security As The Foundation

Your Social Security benefits are the foundation on which you can build a secure retirement. But on average, Social Security retirement benefits only replace about 40 percent of pre-retirement earnings. Most financial advisors say you'll need about 70 percent of your pre-retirement earnings to comfortably maintain your pre-retirement standard of living. They recommend that you prepare for the future with a combination of Social Security, private pensions, and personal savings.

And now, because we're living longer, healthier lives, we can expect to spend more time in retirement than our parents and grandparents did. Achieving the dream of a secure, comfortable retirement is much easier when you plan your finances. You need to save and invest wisely for a comfortable retirement.

Chapter 2: The Basics

How do you qualify for retirement benefits? When you work and pay Social Security taxes, you earn "credits" toward Social Security benefits. You can earn up to four credits per year, based on your wages or self-employment income. This chart shows how much you need to earn this year for each credit. Most people need 40 credits -- that's ten years of work -- earned over their working lifetime to receive retirement benefits.

How much will your retirement benefit be? As you make plans for your retirement, you may ask, how much will I get from Social Security? Social Security benefits are based on your lifetime earnings. Your actual earnings are adjusted, or "indexed", to account for changes in average wages since the years the earnings were received. Then Social Security calculates your "average indexed monthly earnings" during the 35 years in which you earned the most. We apply a formula to these earnings and arrive at your basic benefit. This is how much you would receive at your full retirement age.

Full retirement age Your full retirement age depends on the year that you were born. If you were born in 1944 or earlier, you are already eligible for your full Social Security benefit. If you were born from 1943 to 1960, the age at which full retirement benefits are payable increases gradually to age 67. This chart lists the full retirement age by year of birth.

Benefits for family members Now, let's look at how your family situation might affect benefit payments. When you start receiving Social Security retirement benefits, your spouse and minor children may also qualify for benefit payments based on your work record. And, under certain circumstances, a former spouse could also qualify for benefits based on your work record.

If they qualify, your spouse or child may receive a monthly payment of up to one-half of your full retirement benefit amount. These payments will not decrease your retirement benefit. In fact, the value of the benefits your family may receive, added to your own, may help you decide when to take your benefits.

Chapter 3: Looking Ahead -- Planning For Retirement

Actually sitting down and figuring out your long-range retirement plans can be a daunting task, so Social Security has retirement planning tools to help you. Two retirement planning items are of particular importance to most people -- our retirement estimator, and your Social Security Statement.

You can get your Social Security Statement online. The online Social Security statement at  is a concise, easy-to-read personal record of the earnings on which you have paid Social Security taxes, and a summary of the estimated benefits you and your family might receive, including potential retirement, disability, and survivors benefits.

After you create an account with us, you'll be able to see your online statement at any time. Each year, about three months before your birthday, you'll receive an email reminder to check your online Statement.

You can get online retirement benefit estimates. The online retirement estimator at is a convenient, secure, and quick financial planning tool. It's linked to your actual Social Security earnings record, and eliminates the need to manually key in years of earnings information. Best of all, the retirement estimator is interactive, which means it will let you compare different retirement options. For example, you can change retirement dates or expected future earnings. You can print out up to three different scenarios at one time.

Chapter 4: Making A Decision On When To Retire

At Social Security, we're often asked, "When should I begin receiving retirement benefits?" Choosing when to retire is an important and personal decision.

There's no one best stage for everyone. You can start your Social Security benefits as early as age 62, or as late as age 70, or any time in between those ages. You should consider your health, finances, and family longevity when making that very important decision. Monthly benefits differ substantially based on when you start receiving benefits. To learn more, please read our fact sheet, "When to Start Receiving Retirement Benefits" at

The following chart provides an example of how your monthly benefit amount can differ, based on the age at which you decide to start receiving benefits.

Let's say your full retirement age is 66, and your monthly benefits starting at that age is $1,000. If you choose to start getting benefits at age 62, your monthly benefit will be reduced by 25 percent to $750. This is generally a permanent reduction in your monthly benefit. In addition, you should know that receiving your benefits early will limit any future benefits available to your surviving spouse based on your work record.

If you choose to delay benefits until age 70, your monthly benefit amount would increase to $1,320. This increase is from delayed retirement credits you get for your decision to postpone receiving benefits past your full retirement age. The benefit amount at age 70 in this example is 32 percent more than would you receive each month if you chose to start getting benefits at your full retirement age. You are eligible for any cost of living benefit increases starting with the year you become age 62. This is true even if you do not get benefits until your full retirement age, or even age 70.

Life expectancy calculator Also, there's one other important thing to consider in deciding when to collect retirement benefits: How long you might live. You can use our simple life expectancy calculator at planners/lifeexpectancy.htm to get a rough estimate of how long you or your spouse can expect to live based on your gender and your date of birth.

Chapter 5: Learning About How To Save And Invest For Retirement

Growth in savings The sooner you start, the more time you'll have to save for retirement. This chart shows how important it is to start saving early because of the benefit of compound interest. To learn how to save and invest for retirement, visit This website provides helpful information furnished by over 20 federal agencies, including Social Security.

Chapter 6: Other Things To Consider

If you work and get benefits at the same time. Did you know that you can continue to work and still receive Social Security benefits? But you're subject to an annual earnings limit if you continue to work, apply for retirement or survivor's benefits, and you're under your full retirement age. We count only the earnings from a job or your net profit if you're self-employed. We don't include pensions, annuities, investment income, interest and dividends, veterans, or other government benefits.

This chart shows how the current earnings limits work.

If you are younger than full retirement age, $1 in benefits will be deducted for each $2 in earnings you have above the annual limit of $15,120.

If you reach full retirement age in 2013, your benefits will be reduced $1 for every $3 you earn over the limit of $40,080. The limit applies only to months before full retirement age.

Once you reach full retirement age, there's no limit on how much you can earn and still receive your Social Security benefits.

Did you know that your benefits may be taxable? Some people have to pay federal income taxes on their Social Security benefits. This usually happens only if you have other substantial income, such as wages, self-employment, interest, dividends, and other taxable income that must be reported on your tax return, in addition to your benefits. About one-third of current beneficiaries have incomes that require them to pay taxes on their benefits.

You will have to pay federal taxes on your benefits if you file a federal tax return as an individual and your adjusted gross income as reported on Form 1040 is more than $25,000. If you're married and file a joint tax return, you'll have to pay taxes if you and your spouse have adjusted gross income as reported on Form 1040 that's more than $32,000.

Each January, Social Security mails you a Social Security benefit statement Form SSA-1099, showing the amount of benefits you received in the previous year. You can use this benefit statement when you complete your federal income tax return to find out if your benefits are subject to a tax.

Social Security is not an authority on tax matters. For more information about taxation of Social Security benefits, visit or call the Internal Revenue Service, IRS, toll free at 1-800-829-3676 and ask for IRS Publication Number 915, "Social Security and Equivalent Railroad Retirement Benefits." People who are deaf or hard of hearing may call the IRS toll-free number 1-800-829-4059.

Medicare Coverage An important part of retirement planning is health insurance. Medicare is our country's health insurance program for people age 65 and older. Certain younger people can qualify, too, including those receiving disability benefits after two years, or those with permanent kidney failure or amyotrophic lateral sclerosis, Lou Gehrig's disease. The Medicare program helps with the cost of health care, but it does not cover all medical expenses or the cost of most long-term care.

If you're already receiving Social Security, you will automatically be enrolled in Medicare Parts A and B without an additional application. However, because you must pay a premium for Part B coverage, you have the option of turning it down. You will receive a red, white and blue Medicare card about two months before age 65.

Although people sign up for Medicare with the Social Security Administration, it's actually another federal agency, the Centers for Medicare and Medicaid Services, CMS, that's in charge of the Medicare program.

Medicare has four parts:

  • Hospital insurance, Part A, helps pay for inpatient care in a hospital or skilled nursing facility following a hospital stay, some home health care, and hospice care.
  • Medical insurance, Part B, helps pay for doctors' services and many other medical services and supplies that are not covered by hospital insurance.
  • Medicare Advantage, Part C plans, are available in many areas. People with Medicare Parts A and B can choose to receive all of their health care services through one of these provider organizations under Part C.
  • Prescription drug coverage, Part D, helps pay for medications doctors prescribe for treatment. For more information about Medicare, call Social Security toll free at 1-800-772-1213 and request Medicare Publication Number 05-10043, or go to,  and download the publication. If you're deaf or hard of hearing, you may call our TTY number 1-800-325-0778.

When to apply for Medicare Generally, people should apply for Medicare benefits three months before age 65.

The initial enrollment period starts three months before the month you turn 65 and extends three months past the month you turn 65. If you're not receiving Social Security benefits, you should inquire about applying for Medicare three months prior to turning age 65, so that your coverage can start the month you turn 65.

If you are 65 or older and are covered under a group health plan, either from your own or your spouse's current employment, you have a special enrollment period in which to sign up for Medicare Part B. This means that you may delay enrolling in Medicare Part B without having to wait for a general enrollment period and paying the 10 percent premium surcharge for late enrollment. It's extremely important for workers to check with their employer group health plan for specific guidance on the Medicare Part B special enrollment period.

The general enrollment period is for those people who miss their initial or special enrollment periods. The window to file is January to March, with coverage beginning in July. If you apply in the general enrollment period, you will be assessed a 10 percent penalty for each year after your initial period that you did not have Medicare.

Now for those of you with higher incomes, you should be aware of the Medicare premiums rules for higher income beneficiaries.

By law, higher income beneficiaries will pay higher premiums for Part B and prescription drug coverage. Fewer than 5 percent of people with Medicare are affected, so most people will not pay a higher premium. For more information, call Social Security toll free at 1-800-772-1213, and request "Medicare Premiums: Rules for Higher Income Beneficiaries," Publication Number 05-10536 or go to and download the publication. If you're deaf or hard of hearing, you may call our TTY number 1-800-325-0778. If you need more information on the Medicare program you could also contact CMS at website Toll-free number 1-800-Medicare, 1-800-633-4227. TTY number 1-877-486-2048.

Chapter 7: How To Apply For Retirement And Medicare Benefits

Apply Online For Retirement Applying online for retirement benefits offers several advantages. You can start your claim immediately. There's no need to wait for an appointment.

You can apply from the convenience of your own home or any computer, and you can avoid trips to a Social Security office, saving you time and money. There are no paper forms to sign, and usually no documents are required.

Go to and select "Apply Online for Retirement Benefits."

You'll go through a series of screens that will ask you questions about yourself, your family, and your work.

You don't have to complete the application all in one sitting. If you need a break, you can stop working on the application and restart it again without losing any of the information you entered.

As you go through the application, you'll see "More Info" links. If you need more information at any time to answer a question, just select one of these links.

Once you've answered all of the questions, select "Submit Now." Your application will be sent electronically to Social Security. When you finish your application, you'll get a receipt that you can print and keep for your records.

We'll give you a confirmation number that you can use to check the status of your application online after you've applied.

A Social Security representative reviews every application filed online for accuracy, and will contact you if we need any additional information.

How secure is my personal information?

We use the most secure technology on the internet to keep your information private.

Go online to apply for Medicare

Use our online application to sign up for Medicare. It takes less than ten minutes, and you can apply for Medicare even if you're not ready to retire.

    Follow these simple steps:
  • Go online to and select "Apply Online for Medicare."
  • Go through a series of questions that will help you consider either filing for retirement and Medicare benefits or just filing for Medicare benefits only.
  • Use the "More Info" links if you need more information. Answer questions about current benefits you may be receiving, such as Medicaid or other health insurance, and
  • Select "Submit Now" to send your application electronically to Social Security.

For more information about applying for Medicare only and delaying retirement benefits, visit "Applying for Medicare Only" before you decide at

In addition to applying for Social Security retirement benefits and Medicare online, you can also handle almost any other Social Security related business online. This list shows some of the more popular online Social Security business that you can conduct. And remember that these online services are quick and safe and convenient to use. Please take a few seconds to see what we offer you online.

  • Apply for spouse's benefits.
  • Apply for disability benefits.
  • Apply for extra help with Medicare prescription drug costs. Check your application status.
  • Get your Social Security statement online with a "my Social Security" account.
  • Estimate your retirement benefits. Appeal a disability decision.
  • Find out if you qualify for benefits. Access our Business Services Online, BSO, which enables organizations and authorized individuals to conduct business.

Also, if you already receive Social Security benefits, you can create a "my Social Security" account to take advantage of other online services.

Just go online to our website, to learn more about these services. And again, remember that they are quick, safe, and convenient to use.

  • Get your benefit verification letter.
  • Change your address or telephone number.
  • And start or change your direct deposit.

You can also use our website to request a Form 1099/1042S, Social Security benefit statement, and get a replacement Medicare card.

Chapter 8: Special Situations

There are special situations where the amount of your Social Security benefit may be reduced.

    These provisions are called
  • Government Pension Offset, GPO;
  • Windfall Elimination Provision, WEP.

As the Social Security program evolved, Congress realized that changes had to be made to preserve the intent to treat covered and noncovered workers equitably. Thus, in 1977, the law was changed to incorporate the GPO, and in 1983 the WEP provision was enacted. The GPO provision replicates the offset in spousal benefits that applies to covered workers, while the intent of the WEP is to maintain the progressive nature of the benefit computation.

Windfall Elimination Provision, WEP There are factors that may affect the amount of your retirement benefits. If you worked for an employer who did not withhold Social Security taxes from your salary, such as a government agency, some school systems, or an employer in another country, the pension you get based on that work may reduce your Social Security benefits. The Windfall Elimination Provision affects how the retirement or disability benefit is calculated if you receive a pension from work where Social Security taxes were not taken out of your pay. A modified formula is used to calculate the benefit amount, resulting in a lower Social Security benefit than you otherwise would receive.

If you get a relatively low pension, you are protected. The reduction in Social Security benefits cannot be more than one-half the amount of the pension on which you did not pay Social Security taxes.

For more information, go to  and download the fact sheet, "Windfall Elimination Provision."

Social Security has a WEP online calculator at so you can see how much your benefits may be reduced by the Windfall Elimination Provision. To use this calculator, you will need to enter the monthly amount of your pension that was based on work not covered by Social Security and key in your yearly earnings.

Government Pension Offset (GPO) There's another law that affects spouses and widows or widowers. If you receive a pension from federal, state, or local government based on work where you did not pay Social Security taxes, your Social Security spouses, widows or widowers benefits may be reduced. Your Social Security benefits will be reduced by two-thirds of your government or noncovered pension.

For example, if you get a teacher's pension of $1,200 per month, two-thirds of that, or $800, must be deducted from your Social Security spouses, widows or widowers benefits. If you are eligible for $1,000 spouses, widows or widowers benefits from Social Security, your Social Security benefit is $200 per month at full retirement age.

For more information, go to  and download the fact sheet, "Government Pension Offset."

Social Security also has a Government Pension Offset calculator at so you can estimate your future spouses, widows or widowers benefits under the GPO.

    You need two items to use the calculator.
  • One, the estimated gross monthly amount of your pension from your government job not covered by Social Security.
  • Two, the estimated monthly amount of your Social Security benefits as a spouse, widow, or widower before the effect of the GPO.

Some common retirement strategies We often receive inquiries asking us how do I maximize my Social Security benefits. You must consider your own individual situation when deciding to retire. For example, consider your health, finances, and family longevity. If you're married, claiming benefits early could result in a lower ongoing benefit for you and your spouse. So let's talk about two common retirement strategies.

They are:

  • File and Suspend. Upon reaching full retirement age, a married individual may claim his or her retirement benefits and then immediately suspend payment. This will allow the spouse and any eligible dependents to claim benefits, while the individual continues to work and earn delayed retirement credits.
  • Claim now, claim more later. At full retirement age, a married individual can claim a spousal benefit and then switch to his or her own retirement benefit at a later date, thus building up delayed retirement credits, which will result in a higher retirement benefit. Of course, in most cases your spouse must be entitled to retirement benefits before you can use this strategy.

Special Web Pages Social Security has two specialized web pages for those groups that help others plan for retirement.

Human Resources Professionals web page at, is designed to help human resource professionals help their employees plan for retirement. Financial Planners at  financial planners, is designed to help financial planners help their clients plan for retirement.

Questions Finally, if you have questions, get your answers online or on your mobile device from the Frequently Asked Questions, FAQs, link at In addition to using our website, you can call us toll free at 1-800-772-1213. We treat all calls confidentially. We can answer specific questions from 7:00 a.m. to 7:00 p.m. Monday through Friday. Generally you'll have a shorter wait time if you call during the week after Tuesday. We can provide information by automated phone service 24 hours a day. You can use our automated response system to tell us a new address or request a replacement Medicare card. If you're deaf or hard of hearing, you may call our TTY number 1-800-325-0778.

We hope you found this video helpful as you prepare for retirement.