10 things to know about Social Security

If you’ve reached the stage of life when you’re looking into retirement, here are 10 things you should know about Social Security.

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1. Payouts are based on your age when you start collecting

When you decide to start collecting — called “full retirement age” —  determines how much you get.

For people born between 1943 and 1954, full retirement age is 66. It gradually climbs toward 67 if your birthday falls between 1955 and 1959.

For those born in 1960 or later, full retirement age is 67. You can collect as soon as you turn 62, but taking benefits before full retirement age results in a permanent reduction — as much as 25.83% of your benefit if your full retirement age is 66.

2. How your benefit is measured

Your benefit is based on the 35 years in which you earned the most money.

If you have fewer than 35 years of earnings, each year with no earnings will be factored in at zero. You can increase your benefit by replacing those zero years, say, by working longer, even if it’s just part-time.

But don’t worry — no low-earning year will replace a higher-earning year. The benefit isn’t based on 35 consecutive years of work, but the highest-earning 35 years.

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3. How to find your maximum benefit

There is a maximum benefit amount you can receive, though it depends on the age you retire. For someone at full retirement age in 2016, the maximum monthly benefit was $2,687.

You can estimate your own benefit by using Social Security’s online Retirement Estimator.

4. Have a COLA

(Almost) every year, the government adjusts Social Security for inflation. The cost-of-living adjustment, or COLA, can help you keep up with rising living expenses during retirement.

Because the COLA is calculated based on changes in a federal consumer price index, the size of the COLA depends largely on broad inflation levels determined by the government. That can go up – as much as 5.8% in 2009 – or stay flat – there was no COLA in 2010, 2011 and 2016.

5. The benefits of being married

There are benefits of being married long enough to reach retirement age. One is, one spouse can take what’s called a spousal benefit, worth up to 50% of the other spouse’s benefit. Put simply, if your benefit is worth $2,000 but your spouse’s is only $500, your spouse can switch to a spousal benefit worth $1,000 — bringing in $500 more in income per month.

However, if benefits are claimed before full retirement age, the numbers go down. If you claim your spousal benefit before your full retirement age, you won’t get the full 50%. If you take your own benefit early and then later switch to a spousal benefit, your spousal benefit will still be reduced.

6. Survivor benefits

If your spouse dies before you, you can take what is called a survivor benefit.

If you are at full retirement age, that benefit is worth 100% of what your spouse was receiving at the time of his or her death (or 100% of what your spouse would have been eligible to receive if he or she hadn’t yet taken benefits). A widow or widower can start taking a survivor benefit at age 60, but the benefit will be reduced because it’s taken before full retirement age.

If you remarry before age 60, you cannot get a survivor benefit. But if you remarry after age 60, you may be eligible to receive a survivor benefit based on your former spouse’s earnings record.

7. Leave a spouse, keep the benefit

Just because you’re divorced doesn’t mean you’ve lost the ability to get a benefit based on your former spouse’s earnings record. You can still qualify based on his or her record if you were married at least 10 years, you are 62 or older, and single.

Like a regular spousal benefit, you can get up to 50% of an ex-spouse’s benefit — less if you claim before full retirement age. And the beauty of it is that your ex never needs to know because you apply for the benefit directly through the Social Security Administration.

Taking a benefit on your ex’s record has no effect on his or her benefit or the benefit of your ex’s new spouse.

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8. The longer you wait, the better

There’s a significant benefit to delaying your claim — your benefit will grow by 8% a year up until age 70. Any cost-of-living adjustments will be included, too, so you don’t forgo those by waiting.

While a spousal benefit doesn’t include delayed retirement credits, the survivor benefit does. By waiting to take his benefit, a high-earning husband, for example, can ensure that his low-earning wife will receive a much higher benefit in the event he dies before her. That extra income of up to 32% could make a big difference for a widow whose household is down to one Social Security benefit.

9. Change your mind

With all the benefits on waiting, you do have the ability to change your mind if you’ve started claiming benefits.

Within the first 12 months, you can “withdraw the application.” You will need to pay back all the benefits you received, including any spousal benefits based on your record. But you can later restart your benefit at a higher amount.

10. Pausing for maximum effect

Early claimers have another opportunity for a do-over: They can choose to suspend their benefit at full retirement age.

Say you took your benefit at age 62. Once you turn full retirement age, you can suspend your benefit. You don’t have to pay back what you have received, and your benefit will earn delayed retirement credits of 8% a year.

Wait to restart your benefit at age 70, and your monthly payment will get up to a 32% boost.