Social Security seems straightforward. You turn a certain age, and you start receiving checks in the mail based on the years you worked. Unfortunately, it's nowhere near as easy to understand as it sounds. Here's a look at three things you might not have known about Social Security and the amount you receive each month.
Your Social Security Income Is Not Based On Your Last 10 Years
Many people believe that the amount they'll receive from Social Security is based on their last 10 years of income. This probably comes from the fact that the government requires 40 quarters (or 10 years) of income to be eligible to receive payments. While 40 quarters of income are required, it's not the last 40. Social Security figures in your highest 35 years of inflation-adjusted income. Working part time right before you retire will not have any impact on your benefits.
You Can Get Social Security Benefits If You Never Worked Outside the Home
This may seem to be directly opposite of the last answer, and it is true that you wouldn't get Social Security based off of your own income. But it certainly is possible to receive benefits that are based off of the earnings of your spouse (or ex-spouse, as long as you were married at least 10 years). Spousal benefits for Social Security equal half of the income-earning spouse's benefit amount. Collecting spousal payment doesn't affect the other spouse's payment at all. In a situation where someone is divorced and remarried, remember that the payment amount is based off of the current spouse, and not the ex.
It's Usually Not Best to Start Drawing Checks Right Away
The government offers people the option to start collecting Social Security benefits as early as age 62—an option that right around 40 to 50% of people take. The downside though, is that payments are reduced permanently. Wait until "traditional" retirement age (66 or 67 depending on the year you were born), and you'll receive the full amount each check. It's certainly nice to see a check start coming in every month, but it comes at a cost (around 8% each year). If it's at all possible, waiting to start Social Security payments could make a large difference over time.
Like many things dealing with the government, Social Security isn't exactly straightforward and easy to understand. There are plenty of complicated ins and outs to deal with. You might find that it's best to talk with a Social Security attorney to help you navigate the process.