Key Points
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It’s important to understand how Social Security calculates benefits.
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Know how your filing age affects your monthly checks.
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Read up on what happens when you work while receiving benefits.
Claiming Social Security is probably one of the biggest financial decisions you’ll make in the context of retirement. And as you’re probably aware, there’s a lot riding on that choice.
You might think you’re ready to file for benefits and start getting those monthly checks. But before you claim Social Security, make sure to familiarize yourself with these essential rules.
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Social Security cards.
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1. How benefits are calculated
Social Security doesn’t pay all retirees the same benefit each month. Rather, the amount of money you’re eligible for is based on your earnings history.
To get even more specific, Social Security takes your 35 highest-paid years of income into account when calculating your monthly payments. Earlier wages are adjusted for inflation as part of that benefits formula.
What this means is that if you don’t have 35 years of work under your belt, you’ll have a $0 factored into your benefits calculation for each year you’re missing an income. Too many of those $0s could bring your monthly payments down quite a bit. It’s important to know this, as it might push you to work a bit longer before applying.
2. How your filing age affects your monthly checks
The monthly Social Security benefit you’re entitled to based on your earnings history is yours to collect without a reduction once you reach full retirement age. That age is 67 if you were born in 1960 or later.
You’re allowed to claim Social Security as early as age 62. But for each month you file for benefits ahead of full retirement age, your monthly payments are reduced permanently.
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On the flip side, delaying your claim past full retirement age results in boosted benefits. But you can accrue delayed retirement credits only until age 70.
Beyond that point, your monthly payments won’t grow. For this reason, 70 is generally considered the latest age to sign up for Social Security, even though you can file as late as you want.
3. How the earnings test works
Social Security allows seniors to work while collecting benefits. But if you’re receiving those monthly checks prior to full retirement age, you’ll be subject to an earnings test. And exceeding its limit could mean having some (or in certain cases, all) of your Social Security checks withheld.
The earnings-test thresholds change annually. In 2026:
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You’ll lose $1 in Social Security per $2 in earnings above $24,480 if you won’t reach full retirement age at all.
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You’ll lose $1 in Social Security per $3 in earnings above $65,160 if you will reach full retirement age at some point during the year.
Once you reach full retirement age, withheld benefits are repaid to you in the form of larger monthly checks. But it’s important to know how the earnings test works so you can budget appropriately.
There’s lots to know about Social Security before you claim your benefits. Take the time to read up on the rules so you can sign up with more confidence.
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