Five Social Security Facts You Should Know

Almost 70 million Americans will receive some form of Social Security in 2025, totaling about $1.6 trillion in benefits. This public entitlement program has helped lay a strong economic foundation for Americans since 1935, providing predictable income to retirees and others.

Social Security is an important part of many Americans’ retirement plans. It’s important to understand how the program and benefits work and how vital financial planning services can help you factor it into your retirement plan.

Social Security Explained

Developed at the end of the Great Depression, the Social Security Act promised relief to millions of elderly and retired Americans. Social Security provides benefits for retirement, aid for dependent children, and insurance for the disabled and the unemployed. Today, Social Security benefits represent, on average, almost a third of income for folks over age 65.

However, this income isn’t without its conditions. From claiming strategies to working in retirement, near-retirees and working-age adults need to have a solid understanding of how Social Security works in order to maximize their benefits.

Here are five important facts you should know about your Social Security benefits.

Contact Wealth Enhancement  today if you have any questions about your Social Security benefits or want to speak to one of our wealth planners.

Fact #1. How Is Social Security Calculated?

The Social Security Administration (SSA) calculates your benefits based on your lifetime earnings. If you’re not retired and haven’t set up a Social Security account, you can go to the SSA’s website to learn more about your projected benefits.

The SSA calculates your Social Security benefits by indexing your average monthly earnings during the 35 years you earned the most. The administration generates your basic benefit, or “primary insurance amount,” which is what you’ll receive at your full retirement age (FRA). For January 2025, the average monthly benefit is $1,976.

Fact #2. Your Benefit Amount Depends on Your Retirement Age

Your benefit amount varies depending on when you apply for benefits. You can file to claim benefits before your full retirement age (the age at which you can claim 100% of your calculated benefits), but your benefit will be permanently reduced by a certain percentage. The earliest you can claim is at 62, and you will not receive any additional benefits for delaying past the age of 70.

For example, if you were born in 1960 and retire at 62, you’ll get 70% of your benefit each month. However, if you retire at age 70, you’ll get 124% of your benefit each month.

Full retirement age varies. For those born in 1954, the FRA is 66 years. The FRA gradually increases to 67 for people born in 1960 or later. Benefits increase by 8% per year for those who decide to delay collecting Social Security beyond their full retirement age. As explained above, those who wait until they’re 70 to collect benefits will receive 24% higher payments.

The table below shows how your benefit percentage changes depending on when you claim, based on SSA.gov’s retirement age reduction charts:

Fact #3. You Can Work and Still Collect Social Security Benefits

Before you reach your full retirement age, the SSA calculates your benefit for each year based on the projected income levels you report at the beginning of the year. Whether they’re from the W-2 forms your employer files or your reported self-employment income, these amounts will influence what you receive.

While nothing is stopping you from working in your early retirement, you might want to be careful about how much you earn if you’ve already started your Social Security benefit. For 2025, the Social Security administration set the following limits on these so-called “outside earnings”:

• If you’re younger than your full retirement age for all of 2025, they withhold $1 from your benefits for each $2 you earn above $23,400.
• If you reach your full retirement age in 2024, they withhold $1 for every $3 you earn above $62,160 (until the month you reach FRA).
• Beginning in the month you reach your full retirement age, the SSA will no longer restrict your earnings.

Keep in mind that the amount reduced isn’t lost forever. According to the SSA, your benefit will increase at your FRA to account for the benefits that were withheld due to earlier earnings.

Fact #4. Your Social Security Benefits Are Subject to Income Taxes

You may have thought that, after decades of payroll taxes, that your Social Security benefits would be tax-exempt. For most retirees, though, this isn’t the case.

The income threshold to have your Social Security benefits taxed is relatively low, and they aren’t indexed to inflation, which means that more and more Americans have to pay taxes on their Social Security benefits each year:

• For individual filers, if your income is greater than $25,000, up to 50% of your benefit will be taxed. If your income is greater than $34,000, up to 85% will be taxed.
• For those who are married filing jointly, if your combined income greater than $32,000, up to 50% will be taxed. If income is greater than $44,000, up to 85% will be taxed.

Regardless of income, no one is taxed on more than 85% of their Social Security benefits. For those who are close to a threshold, it can be beneficial to implement strategies to lower your income, in order to lower the amount of your benefits that will be taxed. An experienced wealth planner can advise you on the best way to achieve this.

Fact #5. Married Couples Can Receive Spousal and Survivor Benefits

Social Security benefits for married couples work differently. Here are five important points to know:

1. Your current marital status does not affect your eligibility for Social Security benefits. If you’ve worked for at least 10 years and earned at least 40 work credits, you can receive benefits.
2. The SSA does not penalize married couples or restrict benefits. Spouses receive benefits based on their own work histories.
3. A lower-paid spouse is eligible for either benefit based on their own work histories, or spousal benefits based on their partner’s records. If you’re eligible for both, you will receive the higher one. Lower-paid spouses can receive up to half of their partner’s benefit, which doesn’t impact how much their spouse receives
4. Divorced spouses who were married for at least 10 years are eligible for higher benefits based on the records of their partners.
5. Social Security recipients are eligible for survivor’s benefits if their spouse dies before or while collecting benefits. Survivors may receive between 71.5% and 100% of their spouses benefits, depending on their specific circumstances.

Fact #6. The Social Security Fairness Act Changed Benefits for Millions of Public-Sector Workers

On January 5, 2025, President Biden signed the Social Security Fairness Act into law — one of the most significant changes to Social Security in decades. The law permanently eliminated two provisions that had long reduced or eliminated Social Security benefits for many public-sector employees:

• The Windfall Elimination Provision (WEP): Previously reduced Social Security benefits for workers who also received a pension from a job not covered by Social Security — such as certain state and local government positions, or some federal jobs covered under older retirement systems. 
• The Government Pension Offset (GPO): Previously reduced or eliminated spousal and survivor Social Security benefits for individuals who received a government pension from non-covered employment.

The repeal of both provisions means that affected retirees and survivors are now eligible to receive their full Social Security benefits without reduction. The Social Security Administration estimates that approximately 3.2 million people — including teachers, firefighters, police officers, and other public-sector workers — may see an increase in their monthly payments as a result.

Who is affected? If you or your spouse worked in a position not covered by Social Security (such as certain state or local government jobs) and were previously subject to WEP or GPO reductions, you may be entitled to higher benefits going forward. The SSA has indicated that retroactive adjustments and back payments may also apply for those already receiving reduced benefits.

What should you do? Contact the SSA directly to confirm whether your benefits are affected, and speak with a financial advisor to understand how any increase may impact your overall retirement income plan.

Don’t Walk the Road Alone

As you navigate the complicated world of Social Security benefits, it becomes evident that developing a strategy is crucial. With rules and market conditions that are constantly evolving, developing an adaptive plan can put you in a more optimal position when it comes time to tap into your benefits.

At Wealth Enhancement, we’re committed to guiding you through these decisions with specialized advice tailored to your unique financial situation. Crafted with care by experienced advisors, our comprehensive plans harmonize every part of your financial life.

Your Social Security benefits should be working with the rest of your retirement plan (not against it). To get a second opinion on your current retirement plan, reach out to a Wealth Enhancement advisor today for a complimentary, no-obligation meeting to learn about our financial planning services.

Frequently Asked Questions About Social Security

1. What is the earliest age I can claim Social Security benefits? 

The earliest you can claim Social Security retirement benefits is age 62. However, claiming before your full retirement age (FRA) permanently reduces your monthly benefit. For those born in 1960 or later, claiming at 62 results in a benefit that is 30% lower than what you would receive at your FRA of 67. 

2. How much will my Social Security benefit be reduced if I claim early? 

The reduction depends on how many months before your FRA you begin collecting. For those born in 1960 or later (FRA of 67), claiming at 62 results in a benefit of 70% of the full amount. Waiting until 70 increases the benefit to 124% of the full amount. See the claiming age table in Fact #2 for a full breakdown. 

3. Are Social Security benefits taxable? 

For most retirees, yes. If your income exceeds $25,000 as an individual filer (or $32,000 for married couples filing jointly), up to 50% of your Social Security benefit may be taxed. Above $34,000 (individual) or $44,000 (joint), up to 85% of your benefit may be subject to income tax. No one pays taxes on more than 85% of their benefit, regardless of income. 

4. Can a divorced spouse receive Social Security benefits based on their ex’s record? 

Yes. If you were married for at least 10 years and are currently unmarried, you may be eligible for spousal benefits based on your ex-spouse’s earnings record — up to 50% of their benefit. This does not reduce what your ex-spouse receives. You must be at least 62 years old to claim, and if your own benefit is higher, the SSA will pay you the greater amount. 

5. What is the Social Security Fairness Act, and who does it affect? 

The Social Security Fairness Act, signed into law on January 5, 2025, eliminated the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO). These provisions had previously reduced or eliminated Social Security benefits for approximately 3.2 million public-sector workers — including teachers, firefighters, and police officers — who also received pensions from jobs not covered by Social Security. Those affected may now receive higher monthly payments, and retroactive adjustments may apply. 

6. Can I work and collect Social Security at the same time? 

Yes, but if you haven’t yet reached your full retirement age, your benefits may be temporarily reduced if your earnings exceed certain thresholds. In 2025, the SSA withholds $1 for every $2 earned above $23,400 if you’re under FRA for the full year, and $1 for every $3 earned above $62,160 in the year you reach FRA. Once you reach your FRA, there is no earnings limit and the SSA recalculates your benefit upward to credit the previously withheld amounts. 

7. What survivor benefits does Social Security provide for spouses? 

If your spouse passes away before or while collecting Social Security, you may be eligible for survivor benefits. Depending on your age and circumstances, survivors can receive between 71.5% and 100% of the deceased spouse’s benefit amount. Widows and widowers can generally claim survivor benefits as early as age 60 (or age 50 if disabled). A financial advisor can help you determine the optimal claiming strategy for survivor benefits given your specific situation. 

This information is not intended to provide individualized tax or legal advice. Discuss your specific situation with a qualified tax or legal professional. 

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