Social Security — Plain Answers to the Questions Everyone Is Asking

YOUR MONEY — Issue No. 6

Social Security — Plain Answers to the Questions Everyone Is Asking

When to claim, how much you'll get, and what most people get wrong.

Before anything else — let's address the question I hear most often.

Is Social Security going away?

No. Not in any realistic near-term scenario.

Social Security is the most politically protected program in the United States. Over 70 million Americans currently receive benefits. Eliminating or dramatically cutting it would be politically catastrophic for any administration that attempted it.

What is true: the Social Security trust fund is projected to face a funding shortfall around 2033-2035 if Congress takes no action. If that happens and nothing changes — benefits could be reduced by approximately 20-25%, not eliminated.

That is a real concern worth monitoring. It is not a reason to panic, claim early out of fear, or make a permanent financial decision based on a projected shortfall that Congress has every incentive to address before it arrives.

The honest answer: Social Security will almost certainly exist when you need it. The amount and structure may change. Plan accordingly — but don't let fear drive the timing of one of the most important financial decisions of your life.

What is Social Security?

Social Security is a federal insurance program funded by payroll taxes — the FICA deductions you've seen on every paycheck throughout your working life. You pay in over your career and draw benefits in retirement based on your earnings history.

It is not welfare. It is not means-tested. It is a benefit you earned.

SSI vs. SSDI — what's the difference?

These two programs get confused constantly.

Social Security Disability Insurance (SSDI) is for people who have worked and paid into Social Security but can no longer work due to a qualifying disability. Benefits are based on your earnings history — the same way retirement benefits are calculated.

Supplemental Security Income (SSI) is a needs-based program for people with limited income and resources who are elderly, blind, or disabled — regardless of work history. It is funded by general tax revenue, not Social Security payroll taxes.

For readers approaching retirement the distinction is mostly context — your benefits come through the Social Security retirement program, not SSI or SSDI. But knowing the difference matters when helping an aging parent, a spouse, or a family member navigate the system.

When can you start collecting Social Security?

You can claim Social Security retirement benefits as early as age 62. However claiming at 62 means accepting a permanently reduced benefit — as much as 30% less than your full retirement age benefit for the rest of your life.

Your Full Retirement Age (FRA) depends on when you were born:

If you delay claiming beyond your FRA — your benefit grows by 8% per year until age 70. After 70 there is no additional increase.

To put that in real numbers – on a $2,000/month full retirement age benefit, claiming at 62 pays you $1,400/month while waiting until 70 pays $2,480/month. That’s a difference of $1,080 every single month for the rest of your life. Over a 20 year retirement that gap adds up to nearly $260,000.

Can you work while collecting Social Security?

Yes — but with important limits before you reach full retirement age.

If you claim before your FRA and continue working — your benefit may be temporarily reduced if your earnings exceed certain thresholds. In 2026 if you are under FRA for the full year you can earn up to $22,320 before your benefit is reduced. For every $2 you earn above that limit $1 is withheld from your benefit.

Once you reach full retirement age — you can earn any amount without any reduction in your Social Security benefit. The withheld benefits are also recalculated and added back into your monthly payment going forward.

Are Social Security benefits taxable?

Yes — and this surprises many people.

Depending on your total income in retirement — up to 85% of your Social Security benefit may be subject to federal income tax.

The calculation is based on your combined income — adjusted gross income plus nontaxable interest plus half of your Social Security benefit.

This is worth discussing with a tax advisor before you claim — especially if you have other retirement income sources.

Can your spouse collect on your record?

Yes. A spouse who has little or no work history of their own may be eligible for up to 50% of your full retirement age benefit — even if they never paid into Social Security themselves.

The spouse benefit does not reduce your own benefit. Both can collect simultaneously.

This matters more than most couples realize. A non-working spouse who outlives their partner may rely entirely on Social Security income. Understanding the spouse benefit — and how your claiming decision affects it — is one of the most important joint financial decisions a couple can make.

The Member deep-dive this week covers the claiming age decision in detail — including a real breakeven analysis showing exactly when claiming early versus waiting pays off, how your monthly benefit is actually calculated, COLA explained, excess earnings reduction, survivor benefits, divorce and Social Security, how Medicare and Social Security coordinate, when claiming early makes financial sense for families with minor or disabled adult children, and the little-known do-over option most people never hear about.

Next week: Understanding your lab results — what the numbers on your bloodwork actually mean and what to ask your provider.

Plain Medicine is published for educational purposes only and does not constitute medical advice or establish a patient-provider relationship. Always consult your healthcare provider before making medical decisions.

— Kyle