Understanding Your Social Security Benefits

Skip West
3 min readApr 19


If you’re like most people, your Social Security benefits are a major source of retirement income. But it’s important to understand how your benefits are calculated so you can build an effective long-term retirement strategy. Your benefits are based on your average indexed monthly earnings during the 35 years in which you worked the most. That’s called your primary insurance amount (PIA).

Understanding your Social Security benefits can help you make the most of them in retirement. The first thing you need to do is understand how much of your Social Security benefit will be taxed, and what you can do to minimize that amount.

The IRS has a handy worksheet that can help you figure out your total income taxes. This worksheet shows that up to 50% of your Social Security benefits are taxable for individual filers and up to 85% for married couples filing jointly, if their combined income exceeds $25,000 or $32,000.

There are a number of tax credits that you can claim to reduce the taxes you owe on your Social Security benefits. These can provide you with extra cash to help pay for your daily living expenses, such as rent or a car payment. One of the most widely used tax credits is the Child Tax Credit (CTC). This credit can give you a significant tax break.

Workers can earn a credit for every $1,640 in wages or self-employment income. This amount changes each year based on national wage trends. You can earn up to four credits in a single year by earning $6,560. The credit helps to offset your Social Security and Medicare taxes. You can earn up to 40 credits in a career.

People who earn more than 400 net earnings in a year are self-employed (you operate a trade, business or profession, either individually or as a partner). If you’re self-employed, you can apply for an exemption from Social Security taxes.

If you’re a member of a recognized religious sect opposed to accepting Social Security benefits, you can get an exemption from the self-employment tax on your earnings from a job related to your religion. You must file a form 4361 with the IRS and explain how you are doing your work in the church or order, as well as why you oppose the use of Social Security for the payment of benefits.

Nonresident aliens who work here on temporary visas also are exempt from the Social Security tax. They may include foreign students and educational professionals, as well as those who work for a foreign government here on a temporary basis. They can also exclude their families from the tax.

A Social Security benefit is a supplemental source of income that replaces part of a worker’s pre-retirement earnings. The amount you receive depends on how much you earned and how long you worked. Your benefits increase each year based on increases in the Consumer Price Index. They also are increased if you delay collecting until age 70, although the increase stops after that.

In addition, you may be eligible for a disability benefit. A person is considered disabled under the Social Security program if he or she has a severe medical condition that is expected to last for a year or more or that causes death. The average Social Security disability benefit is $1,476 a month (in 2022), but the amount depends on the type of disability and your age. You can use the SSA’s SSI calculator to estimate your benefits.



Skip West

Skip West was birthed in Greenville, South Carolina, but he relocated to Arkansas as an adult.