Social Security seems like a simple program. You work, you pay your Social Security taxes, and when you retire, you file for benefits. But there is much more to social security than you might think. For example, the longer you work and the more you earn, the higher your benefit may be.

But one of the most important factors when it comes to the size of your Social Security benefit is when you actually claim it. Your age, your other sources of income, your cost of living, and many other factors are important considerations when it comes to withdrawing Social Security benefits. Here’s how they all come into play.

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The more you earn – at least up to the annual Social Security wage base limit – the higher your ultimate benefit will be. According to the Social Security Administration (SSA), it takes your 35 highest earning years and applies a formula to calculate your benefit so higher earners get bigger Social Security checks. But the said benefit is only available at your ‘full retirement age’, which is 67 for anyone born in 1960 or later. You can apply for your benefit from the age of 62, but it will be reduced by as much as 30%.

This is critical to understand because it can literally make or break your retirement. For example, if your full retirement benefit is $2,000 per month, but you plan to retire at age 62, you can expect to receive only about $1,400 instead. If you’re prepared for this reduction, it could even work to your advantage, depending on your financial situation. But expecting $2,000 could turn your entire retirement budget upside down.

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If you plan to work after filing for Social Security benefits, you may be in for another surprise. According to the SSA, your payout will be reduced by $1 for every $2 you earn above an annual limit, which is $22,320 for 2024.

In the year you reach full retirement age, your benefit will be reduced by €1 for every €3 you earn above another limit, namely €59,520 in 2024. That money will be returned to you through a benefit adjustment when you reach full retirement age age, but it is important to understand.

Working while receiving Social Security benefits can come with an additional complication: taxes. If your total income exceeds $25,000 as an individual or $32,000 as a joint filer, 50% to 85% of your Social Security income becomes taxable.

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