Everything You Need to Know About Social Security and Federal Retirement

Let’s review some facts and figures regarding Social Security to refresh and update our knowledge of this key benefit. 

How much is the average monthly Social Security retirement payout in 2022?

According to this Social Security data sheet, the average monthly benefit is $1,657.

Liz and her husband, John, were both born in 1956. Liz started receiving a reduced Social Security payment of $586 per month when she was 62. (73.3% of the entire benefit amount of $800 she would have earned if she had retired at her full retirement age of 66 years and four months.) John is retiring this year and will earn $2,800 per month at the age of 66 and 4 months. How much will Liz get once John retires?

She’ll get $1,115. Don’t feel bad if you couldn’t figure out the solution since it’s a little complicated. At full retirement age (FRA), a spouse is entitled to 50% of their spouse’s total Social Security retirement income or their own benefit, whichever is greater. However, the fact that Liz started receiving her own benefit at the age of 62 has an impact on the computation of her spousal benefit when her husband retires.

Based on her work record, Liz’s total benefit amount that would have been due at her FRA will be used by Social Security (not the amount she has been receiving since she was 62). That sum will be deducted from 50% of her husband’s total. Liz’s entire benefit would be $871 (it has increased from $800 to $871 due to cost-of-living increases since 2018); therefore Social Security would deduct $871 from 50% of her husband’s total benefit amount of $2,800, or $1,400. The resultant $529 would be added to her present benefit of $586, bringing her monthly benefit to $1,115. If Sandy had applied for Social Security at her FRA, she would have gotten the greater of her own full benefit amount or 50% of Tom’s, which would have been $1,400 a month.

What’s the amount you can earn in 2022 if you’re under FRA without reducing the Social Security benefit?

$19,560. If you’re under your FRA for the whole year, Social Security will subtract $1 from your benefit for every $2 you earn above the yearly limit. 

What are the requirements for receiving a Social Security payment based on your ex-spouse’s work record?

If you were married for ten years or more, are not presently remarried, and are not getting a pension from non-Social Security work, former spouses who fulfill the Social Security benefits requirements are handled the same way as current spouses. This entitlement has no bearing on the former spouse’s or their new family’s Social Security benefit. If the spouse receives a Civil Service Retirement System retirement benefit, the dreaded Government Pension Offset will apply, reducing the spousal income by two-thirds of the CSRS retirement. In many circumstances, this will eliminate the benefit. More information is available in this Social Security publication: What Every Woman Should Know.

What proportion of recipients age 65 and older depend on Social Security for more than 90% of their income?

The answer is 12% for males and 15% for women. It’s also worth noting that 37% of men and 42% of women get 50% or more of their income from Social Security.

What is the full retirement age for Social Security?

The earliest you may begin collecting Social Security retirement benefits is at age 62, but the payout is permanently lowered if you apply early. Depending on your birth year, your FRA is between 65 and 67.

What steps can you take to enhance the amount of your Social Security check?

Here are several options:

• Defer payment until you reach age 70.
• Make a claim on your spouse’s job record.
• Work beyond the age of 62.

Social Security was never intended to be your only source of income in retirement. With this understanding, how should you plan your retirement?

Here are some things you can do:

• Learn to live on less now
• Make saving automatic and mandatory
• Plan for being single, even if you aren’t
• Be realistic about when you’ll be able to retire

Always keep in mind that the present federal retirement system consists of three major components: a government retirement payout, Social Security, and personal savings, mainly via the Thrift Savings Plan. The key to a good retirement is balancing and utilizing these aspects.

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