3 Lesser-Known Social Security Rules You Should Know

Brett Hoppe
Published Feb 16, 2024



Social Security is an essential retirement plan in the United States that provides crucial income for retirees, spouses, survivors, disabled individuals, and even children.

However, due to its sheer size and complexity, many of its rules remain unknown to the general public.

In this article, we will shed light on three lesser-known Social Security rules that all future beneficiaries should be aware of, and explain why understanding these rules is essential.


Spousal Benefits

Spousal benefits are often misunderstood, yet they hold significant value within the Social Security program. These benefits are designed to provide retirement income for individuals who either didn't work or earned significantly less than their spouse throughout their lifetime.

For instance, stay-at-home parents commonly receive spousal benefits.

A spousal benefit can be as much as half of the higher-earner's full retirement benefit. This means that if you are entitled to $2,500 per month at full retirement age, your spouse could receive $1,250 per month, even if they never worked.

However, two crucial rules govern spousal benefits.
  • First, the primary earner must have filed for Social Security to claim a spousal benefit.
  • Second, a spouse can either receive a spousal benefit or a Social Security benefit based on their own work record, whichever is higher.
It's also important to note that while spousal benefits can be reduced for claiming early, they do not increase if you wait beyond full retirement age.

This means that if you were the primary earner and your spouse is expecting a benefit on your record, it may not make sense to delay claiming your benefits beyond your spouse's full retirement age.


The Earnings Test

The earnings test is a concept that many Social Security beneficiaries have some understanding of, but its nuances are often misunderstood.

The common misconception is that if you make too much money, you will lose some of your benefits. However, the reality is slightly different.

The earnings limit applies to individuals who have claimed Social Security benefits but have not yet reached full retirement age (67 for those born in 1960 or later).

In 2024, beneficiaries who will reach their full retirement age after this year can earn up to $22,320 without affecting their benefits. Beyond this amount, Social Security benefits will be reduced by $1 for every $2 in additional income.

However, for those who will reach full retirement age during 2024, there is a separate and higher earnings limit. Once you have reached full retirement age, there is no earnings test whatsoever.


Conclusion

As future beneficiaries of Social Security, it is crucial to familiarize ourselves with the lesser-known rules and intricacies of the program.

Understanding spousal benefits, including their limitations and potential trade-offs, as well as comprehending the earnings test and its impact on your benefits, can help you make informed decisions regarding your retirement planning.

By staying informed, you can maximize the benefits you receive from the Social Security system.

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