Can I Take Money Out of My Social Security?

Social Security provides financial support to millions. Understanding how to access these benefits is important for financial planning. This article guides readers through understanding their potential Social Security benefits.

Eligibility for Social Security Benefits

Eligibility for Social Security benefits requires earning “work credits” throughout your employment history. You can earn a maximum of four credits annually based on your earnings. For 2025, one work credit is earned for every $1,810 in wages or self-employment income, reaching the maximum four credits at $7,240. The total credits determine your eligibility for different benefit types, not your monthly payment amount.

For retirement benefits, most individuals need 40 work credits (10 years of work). You can begin receiving retirement benefits as early as age 62, but your monthly benefit will be permanently reduced if claimed before your Full Retirement Age (FRA). FRA varies by birth year: 66 for those born 1943-1954, gradually increasing for 1955-1959, and 67 for those born 1960 or later.

Eligibility for Social Security Disability Insurance (SSDI) requires a specific medical definition of disability and sufficient work credits. The required credits depend on your age when the disability began. For example, if disabled at age 31 or older, you generally need 20 credits earned within the 10 years before disability. Younger workers may qualify with fewer credits, such as six credits earned in the three years before disability if under age 24.

Survivor benefits are available to family members of a deceased worker who earned Social Security credits. Eligible individuals include surviving spouses, ex-spouses, minor children, disabled adult children, and dependent parents. The number of credits needed varies by the deceased worker’s age at death, with a maximum of 40 credits. A special rule allows benefits for children and a spouse caring for them if the deceased worked at least 1.5 years (six credits) in the three years before their death.

Calculating Your Social Security Benefits

Social Security benefits are determined by a multi-step calculation considering lifetime earnings. The first step computes Average Indexed Monthly Earnings (AIME). AIME uses your highest 35 years of indexed earnings, reflecting their value in current dollars. Earnings from years with lower or no income may be included if they are among your highest indexed earnings.

AIME determines your Primary Insurance Amount (PIA), your monthly benefit at Full Retirement Age (FRA). PIA is calculated using a progressive formula with annual “bend points.” This formula ensures lower earners receive a higher percentage of their average indexed monthly earnings back in benefits compared to higher earners. It applies different percentages to portions of your AIME.

PIA is adjusted based on your claiming age. Claiming benefits before your FRA results in a permanent reduction. For example, claiming at age 62 with an FRA of 67 could reduce your monthly benefit by approximately 30%.

Delaying benefits past FRA, up to age 70, increases your monthly benefit via delayed retirement credits. These credits can permanently increase your benefit by approximately 8% for each year you delay, up to age 70. Spousal or survivor benefits are typically a percentage of the worker’s PIA, with specific eligibility rules.

Applying for Social Security Benefits

Applying for Social Security benefits requires specific documents and information. You will need your Social Security number, proof of age (e.g., birth certificate), and earnings details (W-2s or self-employment tax returns). Direct deposit information (bank account and routing numbers) is also necessary. If applicable, military discharge papers might be required.

You can apply for Social Security benefits in three ways. The online portal is convenient, allowing you to apply from home. It provides step-by-step guidance and confirms successful submission. Accurately completing all required fields helps prevent processing delays.

Applying by phone allows you to speak with a representative who guides you through the process. This allows for direct interaction and questions. The Social Security Administration’s toll-free number connects you with trained staff who can assist with your application over the phone.

For in-person assistance, visit a local Social Security office. Call ahead to schedule an appointment to minimize wait times. Bring all necessary documents and information. After submission, the Social Security Administration processes your application and communicates decisions via mail. Processing time varies, and you may be contacted for additional information.

Understanding Benefit Payments and Taxes

Once approved, Social Security benefits are typically paid electronically. Direct deposit into your bank account is the most common, secure, and efficient method. The Direct Express debit card is another option, allowing access without a traditional bank account. Electronic payments are generally mandatory, ensuring timely and reliable delivery.

Benefits are paid monthly, with the schedule often determined by your birth date. This helps individuals plan finances around consistent benefit receipt. Each year, beneficiaries receive Form SSA-1099, detailing total benefits received. This statement is important for tax reporting.

Social Security benefits may be subject to federal income tax, depending on your total income. The IRS uses “provisional income” to determine taxability. Provisional income is calculated by adding your adjusted gross income, any tax-exempt interest, and one-half of your Social Security benefits.

If your provisional income exceeds certain thresholds, up to 50% or 85% of your Social Security benefits could be taxable. For 2025, if your provisional income is between $25,000 and $34,000 for an individual, or between $32,000 and $44,000 for a married couple filing jointly, up to 50% of your benefits may be taxable. If your provisional income exceeds $34,000 for an individual or $44,000 for a married couple filing jointly, up to 85% of your benefits may be taxable. Form SSA-1099 is crucial for accurate tax reporting.

Working After Starting Benefits

Many continue working after starting Social Security benefits; understanding the impact on payments is important. Below Full Retirement Age (FRA) and collecting benefits, an annual earnings limit applies. Exceeding this limit may temporarily withhold a portion of your benefits. For 2025, the Social Security Administration withholds $1 in benefits for every $2 earned above $23,400.

In the year you reach FRA, a higher earnings limit applies to earnings before that month. For 2025, the limit is $62,160, with $1 in benefits withheld for every $3 earned above this amount until your FRA month. Once you reach FRA, the earnings limit no longer applies; you can earn any income without benefit reduction. Withheld benefits are not lost; future monthly benefits are recalculated at FRA to account for withheld amounts, leading to a higher payment.

Continuing to work or delaying benefits past FRA can increase future Social Security payments through Delayed Retirement Credits. Credits are earned for each month you delay claiming benefits past FRA, up to age 70. Each year you delay can increase your monthly benefit by approximately 8%, boosting lifetime benefits. Accurately report earnings to the Social Security Administration to prevent overpayments or underpayments.