Make the Most of Your Social Security Retirement Benefits

TIAA-CREF offers one-on-one consultations on retirement planning, including determining the best way to receive retirement income and how to take into account Social Security benefits. To help you prepare to discuss your Social Security benefits with one of our consultants, TIAA-CREF Vice President and Actuary Michael Heller answers commonly asked questions.

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 Mike Heller

Mike Heller
Vice President and Actuary
Actuarial Consulting Services, TIAA-CREF


Q: I’ve heard that the Social Security system will run out of money in the future. Can I expect Social Security to still be there when I retire?
A: According to the Social Security Administration’s most recent Board of Trustees report,* the Social Security system does indeed face financial challenges over the next several decades. Specifically, annual costs for funding the Social Security system will begin to exceed taxable income in 2016, and by 2037 the system will be able to pay only about 75% of scheduled benefits through 2083.
In order to bring the Social Security system into actuarial balance over the next 75 years, the report notes that Congress could take one or a combination of these two measures:

  • Institute an immediate 16% increase in the payroll tax (from a rate of 12.4% to 14.4%);
  • Introduce an immediate reduction in benefits of 13%.

The report notes that maintaining Social Security’s solvency beyond the 75-year projection period would require even larger changes, because increasing longevity will result in people receiving benefits for even longer periods of retirement.

While these financial challenges may seem daunting, they can be fixed by a combination of gradual benefit adjustments and/or cost increases. For individuals relatively close to retirement, Social Security income will likely reflect the benefit provisions under current law. For those much further from retirement, it’s more likely their Social Security income may be somewhat less than projected under current law, but will still serve as an important component of their total income at retirement.

Q: What determines my Social Security retirement income amount?
A: Your Social Security income is based on your wage history and your age at the time when you begin to receive benefits. You can choose to begin receiving benefits:

  • as early as age 62
  • at what’s known as your “full retirement age”
  • at age 70
  • at any age between 62 and 70

Full Retirement Age Chart

Q: How are my Social Security retirement benefits calculated?
A: The government begins calculating your monthly Social Security income — called the primary insurance amount — at age 62. Your primary insurance amount is based on your average indexed wages, which reflect your past wages (up to the Social Security wage base), adjusted for changes in average national wages over time. After age 62, your earnings history and selected income starting date are used to estimate your monthly payment, which is adjusted for inflation based on changes in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).
If you start benefits before your full retirement age, your monthly payment will be permanently reduced by 0.555% per month for the first three years of early retirement and by 0.416% for each month beyond the first three years.

Q: What’s the best age at which to begin receiving Social Security retirement benefits?
A: There’s no “one size fits all” answer to this question. However, when thinking about when to begin receiving benefits, here are a few points to keep in mind:

  • If you start receiving benefits early, your monthly payments will be smaller, but you’ll get more of them during your lifetime.
  • If you delay benefits until your full retirement age, you’ll receive 100% of your calculated retirement benefit, but you’ll get fewer payments.
  • If you delay your benefits until age 70, you’ll receive the largest possible payments, but fewer of them overall.

In general, if you need to begin benefits earlier in order to cover your expenses, or if you are in relatively poor health, you should begin your Social Security income sooner rather than later. Otherwise, you may want to postpone receiving benefits until you reach your full retirement age, or perhaps even later.

Ultimately, the best time for you to begin receiving benefits depends on your unique financial circumstances. A chart on the Social Security Administration's Website provides an example of how your monthly benefit amount can differ based on the age at which you begin receiving benefits.

Q: What are the Social Security Cost-of-Living Adjustments (COLAs)?
A: The COLA is an automatic adjustment in retirement benefits the Social Security Administration makes to help protect the purchasing power of these benefits from the effects of inflation. The Administration bases COLAs on the percentage increase in the CPI-W from the third quarter of one year to the third quarter of the next. (The COLA is applied in December of each year, but affects the benefit starting the following January.)

Cost of Living Adjustments

Q: Will my retirement pension from my job reduce the amount of my benefits?
A: If you receive your pension from a job at which you also paid Social Security taxes, your pension will not affect your Social Security benefits. However, if your pension comes from a job that’s not covered by Social Security — for example, the federal civil service or certain state, local or foreign government systems — the amount of your benefits will probably be reduced. The Social Security Administration offers two helpful fact sheets: Windfall Elimination Provision and the Government Pension Offset.

Q: Do I owe income taxes on my Social Security retirement benefits?
A: It depends. If you file a federal tax return as an individual and your total income is more than $25,000, then you will have to pay federal taxes on at least a portion of your benefits. If you file a joint return, you’ll owe taxes if you and your spouse have a total income higher than $32,000. Depending on your level of income, up to 85% of Social Security benefits may be subject to federal income tax. While most states do not tax Social Security benefits, contact your state or local taxing authority to learn more.

Q: Can I keep working while receiving benefits?
A: You can work while receiving your own (or survivor) Social Security benefits. However, if you have not yet reached full retirement age, your Social Security benefits will be reduced to the extent that your earned income exceeds a threshold level. Once you reach your full retirement age, any earned wages will not reduce your benefits. But be aware that you will have to pay Social Security and Medicare tax on your earnings, regardless of your age.

If you are self-employed while receiving benefits and your business’ net profit is more than $400, you will owe Social Security and Medicare taxes on your earnings.

Q: If I decide to take my benefits early, but my spouse waits until the full retirement age, how much in benefits will my spouse get?
A: Benefit payments to your spouse will be reduced if your spouse begins receiving income before reaching her/his full retirement age (age 66, for example). However, your spouse’s payments won’t be affected if you decide to begin your own income benefit early.

Q: If my spouse’s benefit is larger than mine, would I be eligible for receiving it if I survive my spouse?
A: Yes. As the surviving spouse, you’d generally be entitled to receive either the monthly retirement benefit based on your own work record or your survivor spouse benefit based on your deceased spouse’s work record, whichever is greater. The latter benefit is equal to 100% of your spouse’s primary insurance amount, unless you (as surviving spouse) had not yet reached the full retirement age. In this case, the benefit is reduced, with the extent of the reduction depending on your age when you start benefits.

Q: How does divorce affect my benefits?
A: If you divorce after 10 years of marriage, you can collect retirement benefits on your former spouse’s Social Security record if:

  • you’re unmarried
  • you’re at least age 62
  • the benefit you’re entitled to receive based on your own work is less than the benefit you would receive based on your ex-spouse’s work
  • your former spouse qualified for benefits.

If you are the former spouse of a deceased worker, you can collect survivor benefits at age 60 (or as early as age 50, if you are disabled). However, a former spouse does not have to meet the age or length-of-marriage rule if he or she is caring for the deceased worker’s child.

If you remarry, you generally cannot collect benefits on your former spouse’s record unless your new marriage ends due to death, divorce or annulment. Also, keep in mind that your former spouse can collect Social Security benefits based on your record if you’re entitled to benefits.

Q: What are the requirements for receiving Social Security survivor benefits?
A: When a person dies, certain family members may be eligible for survivor benefits based on the deceased’s record, if he or she had enough Social Security earnings credits. In general, younger people need fewer earnings credits than older people. However, no one needs more than 40 earnings credits (i.e., 10 years of work) to be fully eligible for any benefits.

Learn more about Social Security survivor benefits.

Learn More About Your Social Security Retirement Benefits:
Speak with one of TIAA-CREF’s experienced, noncommissioned** consultants at 800 842-2252 to discuss how Social Security benefits fit into your overall retirement planning.

Contact the Social Security Administration:
Visit the Social Security Administration’s website or call the Social Security Administration at 800 772-1213. If you’re hearing-impaired, call the TTY line, 800 325-0778, Monday through Friday, 7 a.m. to 7 p.m. (ET).

Visit your Local Social Security Office:
Go to the Social Security Office Locator to find information about your local Social Security office. If you live outside of the United States, this site provides information on Social Security’s international operations and how to receive benefits while living overseas.

Calculators for Estimating Benefits:
The Social Security Administration’s website calculators enable you to estimate your pension benefit amounts using different retirement dates and levels of future earnings.

Social Security and Taxes:
Call the IRS at 800 829-3676. If you’re hearing-impaired, call the IRS’s TTY number, 800 829-4059, or go to You may also want to consult IRS Publication Number 915, Social Security and Equivalent Railroad Retirement Benefits.

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The tax information contained herein is not intended to be used, and cannot be used, by any taxpayer for the purpose of avoiding tax penalties that may be imposed on the taxpayer. It was written to support the promotion of the products and services addressed herein. Taxpayers should seek advice based on their own particular circumstances from an independent tax advisor.

This discussion of Social Security is general in nature, is intended for informational purposes only, and is not intended to provide specific advice or recommendations for any individual or organization. The circumstances surrounding each situation differ.

TIAA-CREF and its affiliates do not provide tax or other legal advice. Please consult your own advisors regarding your particular situation.

* The 2009 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds, May 12, 2009.

** Our consultants receive no commissions. TIAA-CREF compensates the consultants through a salary-plus-incentive program based on client service excellence and financial results. Consultants will only recommend products that help achieve our clients’ goals.

TIAA-CREF Individual & Institutional Services, LLC and Teachers Personal Investors Services, Inc., members FINRA, distribute securities products.

© 2014 and prior years, Teachers Insurance and Annuity Association - College Retirement Equities Fund (TIAA-CREF), New York, NY 10017