Millions of baby boomers are set to retire in the next 20 years, and most will rely on Social Security as an important source of retirement income. As they approach retirement, Americans want to understand how Social Security works.
You'll get a bigger check every month. However, how much bigger depends upon what year you reach full retirement age, and how long you postpone collecting benefits. If you were born in 1943 or later, you'll receive 2/3 of 1% for each month that you delay collecting retirement benefits (8 percent more per year), up until age 70. So, for example, if your full retirement age is 66 and you delay collecting benefits for 4 years, your benefit at age 70 will be 32% higher than at age 66.
A portion of your benefits may be subject to income tax if your modified adjusted gross income (MAGI), plus one-half your Social Security benefits, exceeds specific limits. Your MAGI equals:
Getting Social Security disability benefits is a two-step process. First, the Social Security Administration (SSA) determines whether you are eligible to receive benefits. This determination is based on the number of years you have worked and paid Social Security taxes. Second, you apply for disability benefits by furnishing information about your claim, including the names, addresses, and telephone numbers of physicians, hospitals, and clinics that have treated you for your disability. You will also be asked to provide a copy of your most recent W-2 form (or tax return if you're self-employed), as well as your Social Security number and proof of your age.
Social Security: Demographic Realities Create Big Challenges
Providing retirement benefits was a key provision of the Social Security Act of 1935. Older Americans were especially financially vulnerable during the Great Depression, and Social Security was enacted partly to provide them with some continuing income after retirement.