How It Works: Social Security
The vast majority of resources on Social Security focus on the thousands of rules and the myriad of strategies to maximize your Social Security benefits. There simply don’t seem to be enough resources, though, that explain how Social Security actually works when you’re ready to receive your benefits. When do you apply? Do you call someone? Is there an online application? Is there paperwork involved? This piece is intended to be a convenient, informative guide to the mechanics of how Social Security works.
When to Apply
Not least because it affects your monthly paycheck, the most pressing question is often, “When should I apply?” And there is merit to weighing the options to determine exactly at which age you should file for Social Security benefits. As our own Dave Yeske explained to CNBC reporter Shelly Schwartz, “The choices people make about collecting Social Security retirement benefits could have a huge impact on the benefits they receive over the next 30 or 40 years.”
Determining the optimal strategy is not always about picking the highest number. Factors that may influence the decision include your monthly budget, other sources of retirement income, and your life expectancy. Yeske Buie uses software to calculate the dollars-and-cents answer, and we combine that with personal conversations and our understanding of your unique situation to determine which strategy works best for you. And whichever method you choose to determine when to claim your benefits, Dave’s most valuable advice is this:
“Don’t wait until you’re about to file for benefits.”
The absolute earliest you can begin receiving benefits is at age 62. According to the Social Security Administration, “You must be at least age 62 for the entire month to be eligible to receive benefits. If you were born on the first or second day of the month, you meet this requirement in the month of your 62nd birthday. If you were born on any other day of the month, you do not meet this requirement until the following month.”1 As an example, if you turn 62 on July 4th, you can start receiving benefits as early as August.
Regardless of whether you choose to claim your Social Security benefits at age 62, age 70, or somewhere in between, the Social Security Administration recommends that you apply to receive your benefits 4 months before the date that you want your benefits to start.1 Following the previous example, if you wanted your benefits to start as early as possible, you would apply in April to receive your benefits in August.
How to Apply
Now, how do you tell the Social Security Administration that you’d like to receive your retirement benefits? The process is actually quite simple, and the Social Security Administration has done what they can to make the application for benefits as streamlined as possible. To apply, start by visiting the Social Security Retirement Benefits webpage and clicking the blue “Apply Online” button. Documents you may need during the application process include your most recent W-2 or tax return, your Social Security card, and your birth certificate. You can learn more by reviewing Social Security’s online document checklist.
Before you are able to complete an application for Social Security Benefits, you will need to create a “my Social Security” online account. To create this account, visit the “my Social Security” home page and select “Create an Account.” What follows is probably the most confusing aspect of the entire application process, as you will need to find and select the “Create an Account” link two more times before you are prompted to enter your email address and create a password. However, once you navigate this minor obstacle, the process is much easier to follow. And, if you encounter any issues or have any questions about the purpose of a “my Social Security” account, this FAQ page offers guidance and support.
Receiving Your Benefits
Now that you have submitted your application to begin receiving your benefits, you may wonder,
- “What’s next?”
- “Will I get a check in the mail?”
- “How do I get my money?”
- “When will it show up?”
According to the Social Security Administration, “Federal law mandates that all Federal benefit payments – including Social Security and Supplemental Security Income benefits – must be made electronically.”2 You can receive your benefits either via direct deposit or to a Direct Express® debit card.
Most people are aware that Social Security benefits are paid monthly. However, the exact timing of these payments is less widely known. Benefits are paid in the month following the month for which they are due. For instance, you would receive your July benefit in August. The exact day of the month that you receive your benefit depends on your birth date. (If you receive benefits based on your spouse’s work, then your benefit payment date is based on your spouse’s birth date.) The below chart indicates exactly when benefits are paid.3
Additional Resources
Contrary to the claim of most conspiracy theorists, the Social Security Administration really does want you to receive your benefits and understand the system that you’ve paid into throughout your entire career. The Social Security Administration website contains vast amounts of information, guides, and documents to try to answer any and all questions about your retirement benefits. Additionally, Yeske Buie has written a few prior articles laying out the basics of Social Security. Below are just some highlights of the myriad of resources available to you:
If this level of detail seems intimidating, if you’re looking for guidance on when or how to apply for benefits, or if you simply don’t know where to start, please don’t hesitate to reach out to a member of Yeske Buie’s financial planning team.