Here's What You Should Know Decades Before You Retire

There's some essential retirement information you'll need to brush up on before you start cashing in on Social Security checks.

Katie Teague Writer II
Katie is a writer covering all things how-to at CNET, with a focus on Social Security and notable events. When she's not writing, she enjoys playing in golf scrambles, practicing yoga and spending time on the lake.
Expertise Personal Finance: Social Security and taxes
Nina Raemont Writer
A recent graduate of the University of Minnesota, Nina started at CNET writing breaking news stories before shifting to covering Security Security and other government benefit programs. In her spare time, she's in her kitchen, trying a new baking recipe.
Katie Teague
Nina Raemont
4 min read
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We've got your Social Security questions, answered.

Sarah Tew/CNET

Planning to retire in 2023? With the record-high cost-of-living adjustment increases that Social Security beneficiaries began receiving in January, you may be extra excited to leave your job and cash in on the benefits this year. But before you start dreaming of that permanent out-of-office lifestyle and collecting your Social Security money, there are multiple things to consider. You have many options when it comes to your benefits, and several of those can affect how much money you receive each month -- like when you decide to start collecting your benefits.

We'll tell you what you need to know about your Social Security benefits before you retire. 

Your Social Security money is based on your income

The amount of money you make during your career plays an important role in determining how much money you'll receive from Social Security. If you work a total of 45 years, only the highest 35 years of earnings would count toward your benefit amount. For example: If you earned $35,000 for the first 10 years of your employment history and $55,000 for 35 years, only the $55,000 income would count (so you'll receive more money).

Here's more information on how your Social Security benefits are calculated.

There's a cap on Social Security money you get each month

A person who earns $900,000 per year may not receive more Social Security money each month than a person who makes $200,000 per year. That's because the Social Security Administration has a cap on how much income can be taxed by the administration. The cap amount has changed over the years and will likely continue to do so. 

For 2023, the maximum taxable earnings is $160,200; in 2015, it was $118,500.

If you work more than one job and employers withhold more than the maximum from your paycheck, it's possible the taxes could exceed the maximum amount. If that's the case, you can claim a refund from the IRS for the money that exceeded the maximum amount, according to the SSA.

Here's how the maximum amount of money you could get breaks down monthly in 2023:

  • Collecting Social Security at age 62: $2,572
  • Collecting Social Security at full retirement age: $3,627
  • Collecting Social Security at age 70: $4,555

Waiting to collect benefits years after retiring? Not so fast

If you're planning on retiring earlier -- like age 60 -- and living off savings and a 401(k) plan, stop right there. If you retire before age 62, when you can officially begin receiving Social Security benefits, any years not worked will show as $0 income and still be factored into your overall Social Security pay. 

Here's why: The Social Security Administration uses your last 35 years of work history to calculate your monthly benefit amount after you retire. If you stop working and have less than 35 years of work history, or lower income for other years worked, your benefit amount will be reduced.

If instead you continue to work an additional two years, any low earning years would be replaced by high earning years, which could increase your benefit amount. 

Three $100 laying on top of each other

You don't have to wait until full retirement age to start collecting benefits.

Sarah Tew/CNET

You can start collecting benefits before your full retirement age

You can't begin collecting your Social Security benefits at age 45 (sorry), but you can collect before your full retirement age. The earliest age you can start receiving your benefits is 62; full retirement age is 67 for anyone born in 1960 or later. 

You must have 40 credits to be eligible for Social Security benefits. Credits are earned when you work and pay Social Security taxes. On average, it takes around 10 years of working to earn 40 credits.

If you choose to start receiving your benefits early, your monthly payments will be reduced by 30% (if you were born in 1960 or later). 

You'll get more money if you wait to cash in on your Social Security

You likely know that if you wait until full retirement age to collect your Social Security benefits, you'll receive 100% of your benefits. But if you decide to wait until age 70 to retire, you'll get even more money. 

Your benefits will increase by a percentage for each month you delay receiving your benefits past full retirement age up to age 70. If you were born in 1960 or later and wait to start receiving Social Security benefits until age 70, you'll get 124% of your benefits.

5, 10, and 20 dollar bills

You can get more money if you wait to retire.

James Martin/CNET

You can see your estimated monthly retirement amount online now

If you're interested in seeing your estimated monthly Social Security benefits amount based on your current work history, it's quick and easy to do. You'll need to create a My Social Security account online. 

Even if you're still 20 or more years away from retiring, you can see an estimate of how much you could get based on last year's income and previous years worked. You'll see a table that shows your monthly benefit amount for retiring early, on time or delayed.

When you're ready to collect your benefits, you can also use My Social Security to fill out a retirement application, among other things.

For more information, here's the easiest way to save for retirement.