How do the Social Security Benefits work out?


Benefits payable under Social Security are paid as a legal right and not according to need. Workers and employers contribute a portion of each worker’s earnings (via the FICA Tax) to be utilized for retirement, disability, and certain other events. Social Security uses the contributions on behalf of current workers to pay benefits for those currently retired, disabled, or otherwise entitled to such benefits. The fact that current contributions are used to pay current benefits is the source of current concerns regarding the future viability of such benefits as more Baby Boomers start receiving Social Security Benefits.

Social Security benefits are related to the recipient’s earnings while working (both earnings per year and years of earnings). While there is a cap on earnings subject to contributions, as well as earnings used for calculating benefits, in general workers who contribute more will receive greater Social Security benefits. For more information, visit the Social Security Administration’s web site at: or call the SSA at 1-800-772-1213.

Social Security Benefits are also partially determined by your birth year and a what age you choose to begin collecting benefits; you may choose to start collecting benefits from age 62 to age 70.

Working while receiving Social Security Retirement Benefits.

You may choose to continue working after electing to receive Social Security retirement benefits, however, your benefits may be temporarily reduced by a portion of your income based on a number of factors, including your full retirement age and the amount of your income.

A full explanation of the relationship among Social Security retirement benefits, birth year, and income limits can be found at:

The amount by which benefits are reduced by working will subsequently be recovered. To quote the Social Security Administration: “If some of your retirement benefits are withheld because of your earnings, your benefits will be increased starting at your full retirement age to take into account those months in which benefits were withheld.

As an example, let us say you claim retirement benefits upon turning 62 in 2007 and your payment is $750 per month. Then, you return to work and have 12 months of benefits withheld. We would recalculate your benefit at your full retirement age of 66 and pay you $800 a month (in today’s dollars). Or, maybe you earn so much between the ages of 62 and 66 that all benefits in those years are withheld. In that case, we would pay you $1,000 a month starting at age 66.”

Other Resources

Stanley A. Tomkiel III, a lawyer from New York, has authored the “Social Security Benefits Handbook”, which gives an in-depth explanation of many aspects of Social Security. The contents of this book are available free at

Social Security Administration Web Site: For a history of Social Security, including programs which predated Social Security, see

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