Social Security Basics: Five Things to Remember

These are five basic things to know about Social Security.

Social Security benefits are a crucial component to a fed’s retirement, known as one of the three legs of the Federal Employees Retirement System (FERS), with the Thrift Savings Plan (TSP) and the FERS pension being the other two.

Here are 5 things to keep in mind about your retirement income.

Factors that Affect Your Monthly Benefit Amount 

The average monthly Social Security Benefit (excluding survivor and disability) was $1,592 gross as of June 2022. It is important to remember that a fraction of your Social Security is subject to taxation if your annual income is over a certain limit – $25,000 for an individual and $32,000 for a married couple.

The factors that determine your Social Security amount are:

  • Work history
  • Age 
  • Benefit start date
  • Marital status 
  • Sometimes the IRS life expectancy factor is believed to influence one’s Social Security benefit, but it is not involved in the calculation. 

Full Retirement Age 

Choosing when to withdraw your benefits is an important decision. You are first eligible at age 62 and 1 month, but if you’re still working, your benefit will be subjected to the dreaded earnings test, which causes reductions if your earned income is over a certain amount – $19,560 in 2022. The full retirement age (FRA) is when you can claim your full benefit, even you are still working, so it’s a good idea you know when yours is. It’ll be between the age of 65 or 67 depending on the year you were born. If you were born in 1960 or later for instance, your FRA is 67. 

Medicare and Cost-of-Living Adjustments (COLAs)

Premiums for Medicare B are deducted directly from your Social Security benefit. This is important to keep in mind when hearing about upcoming COLAs – which occur on a yearly basis and are based off the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). If there’s no inflation (or even deflation), your monthly benefit does not change. If there is, then your Social Security benefit increases by the same percentage as the CPI-W. For example, the 2022 COLA was 5.9%. Next year’s COLA is estimated to be the highest in around four decades.

But even though COLAs give Social Security income a boost, healthcare costs – and therefore Medicare premiums – tend to rise along with inflation, typically offsetting any COLA increase. The 2022 Medicare B premium increase was 14.5%, which wiped out the 5.9% adjustment, but I suppose a decrease of 8.6% beats a reduction of over 14%. 

Survivor Benefits

Should you pass away, any surviving children or spouse may be eligible for Social Security survivor benefits. Many federal employees may not be aware of this, and if they are, don’t realize that these survivor benefits are less than the full benefit that would’ve been received by the original recipient.

Ex-Spouse Benefits

An ex-wife or ex-husband can claim a portion of your Social Security benefits if the following five following statements are all true regarding that individual: 

  1. They are 62 years or older
  2. They are not married 
  3. The marriage lasted at least 10 years 
  4. The benefit they are entitled to is less than the benefit they would receive on your record as your ex. 
  5. This may seem obvious based off the last statement, but you also need to be eligible for Social Security – either retirement or disability benefits. 

**The information has been obtained from sources considered reliable but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Benjamin Derge and not necessarily those of RJFS or Raymond James. Links are being provided for information purposes only. Expressions of opinion are as of this date and are subject to change without notice. Raymond James is not affiliated with and does not endorse, authorize, or sponsor any of the listed websites or their respective sponsors.

About the Author

Benjamin Derge is a Financial Planner and Chartered Federal Employee Benefits Consultant, (ChFEBC℠), as well as a Writer and Editor for Serving Those Who Serve, a financial firm that specializes in helping federal employees with their benefits.