Understanding your Social Security retirement benefits

What is the retirement age in the US? How many years do you need to work to earn a full retirement from the Social Security Administration (
SSA)? If you are a non-US citizen, will you receive US retirement benefits? Below your key questions answered.

How is the SSA funded?

The Social Security Administration (
SSA) was established in 1935 by President Franklin D Roosevelt. The SSA is funded by taxes paid by employers (6.75% of wages through the Federal Insurance Contribution Act – FICA), by taxes paid by employees (6.75% of wages) and by taxes paid by self employed individuals (15.3% of earnings through the Self Employed Contribution Act – SECA).

What is the full retirement age (FRA) to earn full Social Security retirement?

You become entitled to your full benefits at your full retirement age (
FRA).  Your FRA depends on when you were born.  For example, if you were born before 1937, your FRA is 65 years; if you were born after 1960, your FRA is 67 years. You do not need to reach your FRA to receive benefits. You can start collecting benefits as early as 62 years old (for a smaller monthly amount for more years) or wait till you reach 70 years old (for a larger monthly payment over a shorter timeframe).

To check your FRA:

How many years do you need to work to be eligible for Social Security retirement?

You must have a total of 10 working years (40 quarters) with a minimum of $1320 of quarterly wages (or self employment income) for which social security is paid – to be eligible for SSN benefits.

To check your minimum wage:

How is the SSN retirement calculated?

The amount of SSN benefits is based on lifetime earnings as well as the age at time of retirement.
Higher lifetime earnings result in higher benefits. The highest 35 years are used to calculate the average monthly earnings. Each year is indexed for inflation to approximate what earnings for that year would be in today’s dollars. Earnings for each year are also capped by the Social Security maximum earnings subject to Social Security tax for that year.

The amount of benefits also depends on the age when a person decides to start collecting SSN benefits. If benefits begin prior to FRA, benefits are permanently reduced. If benefits begin after FRA, benefits are permanently increased.

What is the maximum SSN retirement you will receive?

The maximum benefit you will receive depends on the age you retire. For example, if you retire at FRA in 2018, your maximum benefit would be $2,788. If you retire at age 62 in 2018, your maximum benefit would be $2,158. If you retire at age 70 in 2018, your maximum benefit would be $3,698.

To download your SSA statement showing your retirement benefits:

Is SSN retirement taxable?

If SSN retirement is your only income, it is no taxable. However, if you earn other income (such as self-employment, interest, dividends) in addition to your SSN retirement, you may have to pay income taxes on your SSN benefits.

In 1983 Congress voted to start taxing social security benefits. As the provision was NOT indexed to inflation, every year more retirees pay tax on social security benefits.  The taxability of your benefits depends on your earnings. If your “
provisional income” (income + 50% of SSN benefits) exceeds $34K for single & $44K for married filing jointly (base amount), then up to 85% of your benefits could become taxable.

The tax on SSN benefits:

Can non US citizens receive SSN retirement?

Non US citizens who are lawfully in the United States when they retire are eligible for SSN benefits.
Non US citizens who live outside the US for more than 6 months when they retire usually will not receive SSN benefits - unless they are citizens of a
Totalization agreement country. A Totalization agreement is a bilateral International Social Security agreement between the US and another country. The totalization agreement is designed to improve benefit protection for workers who have divided their careers between the United States and another country.

Totalization agreement per country - 
France –US agreement -
France  - Centre des liaisons Europeennes et Internationales de Securite Social (CLEISS) -

Dont' delay: your retirement planning starts during your working years. For retirement tax savings tips contact Karine Bauer EA at Kbauer Financials LLC . Karine Bauer, EA is an Enrolled Agent licensed by the Treasury Department with unlimited rights to represent taxpayers before the Internal Revenue Service. She is an experienced tax professional with more than 20 years of international experience. As always, the views contained in this article are not tax or legal advice and are not a substitute for consulting with a professional.

Updated on 06/08/2018