Social Security: Where Do I Even Begin?

I was talking to a friend the other day about Social Security. “Yikes,” I said, “I’m actually old enough to start thinking about it!” And just as the words came out of my mouth, I realized how little most people know about what happens when it’s time for Social Security retirement benefits.

"How far in advance do you sign up?"

"When do you get benefits?"

"Do you pay taxes?"

"Are there other deductions?"What if I’m still working? 

What if I’m still working? 

Never fear, this intrepid Financial Concierge did some research and has answers for those questions.

The first thing I want to tell you is to sign up for your mySSA account if you haven’t already. Like right now. Today. It’s a super handy resource for Social Security, even long before you’re ready to retire. You can see your earnings record, estimated benefits at different ages, and when it’s time, apply for benefits. 

If you’ve frozen your credit, you won’t be able to sign up online until you unfreeze your records. If you decide to unfreeze, you can choose a certain amount of time, for example 1 day, and then your credit will automatically refreeze when the time period is up.

Signing up

You can sign up for benefits up to 4 months prior and no later than the month you want benefits to start. Since the earliest you can receive benefits is 62, the earliest you could file is 61 years and 8 months. Note that receiving benefits at 62 is not full retirement age. To check what your full retirement age is, click here.

Note: This article doesn’t cover the analysis of when is it best to start receiving benefits. Check out this article from Social Security about what to consider when making this personal decision.  

Once you know when you want to start receiving benefits, you can sign up for benefits online, by phone (800-772-1213), or in person at any Social Security office. You can find your local office by checking this site. If you decide to go to an office, it’s best to schedule an appointment to reduce waiting time.

You’ll need some important paperwork to complete your application:

• Birth certificate
• Proof of U.S. citizenship or lawful alien status
• Military service paperwork if you served (DD-214)
• Copy of your W-2 or self-employment tax return for last year

Part of the application includes the date you want benefits to start. Hopefully, you’ve given some careful thought to this and are applying at a time that provides maximum benefit for you.

One other important point in the application process is the option to have the SSA withhold federal tax from your benefit. About 30% of recipients will pay taxes on benefits depending on their income level. You may choose to withhold to avoid paying a large sum at the end of the year. Read here for more about who pays on Social Security benefits. If you decide you want to withhold taxes, you’ll use the W-4v form. Only 7, 10, 12, 22 percent can be withheld from benefit checks, no dollar amounts can be specified. The W-4v form is also used to change withholding once you’re receiving benefits.

The application will take about 15-30 minutes to complete and SSA recommends you do it all at once. However, you can save your data and receive a re-entry number to return to your application, or you can log back into your mySSA account.

If there are any issues with your application, you’ll be contacted by SSA.

I’ve applied, now what?

Once you’ve submitted your application, SSA will review and let you know if (1) you are eligible to receive benefits on another person’s record and (2) if another person is eligible to receive benefits on your record. They will contact you to discuss these items.

Once all forms are received and processed, SSA will send you a letter with a decision. If you are approved for benefits, your checks will arrive on the 2nd, 3rd, or 4th Wednesday of the month, depending on your birth date. If you were born on the:

• 1st-10th, your checks will arrive on the 2nd Wednesday
• 11th-20th, your checks will arrive on the 3rd Wednesday
• 21st-31st, your checks will arrive on the 4th Wednesday

What’s taken out of my benefit?

Depending on how you applied, you may see some deductions taken out of your benefit check.

• If you chose federal tax withholding, you’ll see a deduction for Federal taxes.
• If you owe back taxes, are under support order, or are in collections for student loans, you might see a deduction for these items.
• Medicare Part B, if you’re 65 or older and signed up for Part B.

What if I’m still working?

If you’re younger than full retirement age and make more than the yearly earnings limit, your earnings may reduce your benefit amount.

• If you’re under full retirement age for the entire year, SSA deducts $1 from your benefit payments for every $2 you earn above the annual limit. For 2019, that limit is $17,640.
• In the year you reach full retirement age, SSA deducts $1 in benefits for every $3 you earn above a different limit. In 2019, the limit on your earnings is $46,920 but they only count earnings before the month you reach your full retirement age.
• If your earnings will be over the limit for the year but you will be retired for part of the year, SSA has a special rule that applies to earnings for one year. The special rule lets SSA pay a full Social Security check for any whole month they consider you retired, regardless of your yearly earnings.

Once you reach full retirement age:

• Beginning with the month you reach full retirement age, your earnings no longer reduce your benefits, no matter how much you earn.
• SSA will recalculate your benefit amount to leave out the months when we reduced or withheld benefits due to your excess earnings.

There you have it. Everything you need to know to get signed up for Social Security. It’s a straightforward process but requires some forethought and decision making before completing the application. The resources at SSA.org are extremely helpful, as well as the information you’ll find on your mySSA account, so with a little bit of homework you should be able to get through the application process without any trouble. Best of luck!