Social Security Benefits: Top 8 Things You Need to Know
Social Security is a federal program that provides retirement, disability, and survivor benefits to eligible individuals. It is an essential source of income for many Americans who have worked and paid into the system throughout their careers.
If you’re approaching retirement age or considering applying for Social Security benefits, it’s important to understand how the program works and what benefits you may be entitled to receive. In this post, we’ll cover eight things you need to know about Social Security benefits.
1. Eligibility Requirements
To qualify for Social Security retirement benefits, you must have earned at least 40 credits during your working years. This typically requires ten years of work history with earnings subject to Social Security taxes.
You can start receiving retirement benefits as early as age 62, but your monthly benefit will be reduced if you claim before reaching full retirement age (FRA). FRA varies depending on when you were born; it ranges from 66-67 for those born in or after 1943 and gradually increases up until those born in or after 1960 who are at FRA by age 67.
Keep in mind that if you continue working while receiving Social Security payments before FRA, there may be limitations on how much money you can earn without having your benefit reduced based on annual earnings limits set by social security rules.
2. Retirement Benefit Amounts
The amount of your monthly benefit payment depends on several factors including the number of years worked and lifetime earnings history which determines average indexed monthly earnings (AIME). The SSA uses a complex formula based on AIME adjusted each year with inflationary gains known as COLAs (cost-of-living adjustments) to calculate individualized benefit amounts due upon claiming.
Generally speaking though the more money earned over one’s lifetime results in a higher payout amount each month once someone begins claiming their SS entitlements starting from Full Retirement Age (FRA) or later.
3. Spousal and Survivor Benefits
If you’re married, divorced but were married for 10 years or longer, or widowed, you may be eligible for spousal benefits based on your spouse’s work record. A spouse can receive up to 50% of their partner’s benefit amount if they claim at Full Retirement Age (FRA). Surviving spouses may also qualify for survivor benefits that are typically equal to the deceased worker’s full retirement benefit.
4. Disability Benefits
Social Security provides disability benefits to individuals who have a qualifying medical condition that prevents them from working and earning income. To be eligible, you must have worked long enough and recently enough under Social Security-covered employment.
The SSA defines “disability” as having a physical or mental impairment severe enough to prevent substantial gainful activity (SGA) which is currently defined as earning more than $1,310 per month in annualized wages in 2022 ($2,190 per month if blind).
5. Medicare Enrollment
Medicare is the federal health insurance program for people over age 65 and younger people with certain disabilities or illnesses such as end-stage renal disease. Most people become eligible for Medicare when they turn 65.
However those receiving Social Security retirement benefits will automatically enroll into Parts A & B of Medicare once turning age 65 unless they opt out during an initial enrollment period upon becoming entitled to SS payments before reaching this milestone birthday (some exceptions apply).
6. Taxes on Social Security Benefits
Depending on your other sources of income in addition to SS entitlements received each year – including pensions withdrawals from IRAs/401(k)s; investment gains; rental income; self-employment earnings etc., it might be possible that recipients will need to pay taxes on some portion of their social security payments due each year especially if receiving a larger payout amount annually.
Individual filers with gross incomes above $25,000 and married couples filing jointly with gross incomes above $32,000 could potentially face taxes on up to 85% of their Social Security benefits.
7. Applying for Benefits
You can apply for Social Security retirement or disability benefits online at any time by visiting the SSA website. Alternatively, you may also apply in person at your local Social Security office.
To complete an application successfully, you’ll need to provide personal information such as your birthdate and social security number as well as employment history including dates worked and wages earned during those years.
8. Future Changes to Social Security
The future solvency of the program has been a topic of concern among policymakers due to demographic shifts caused by aging populations combined with low fertility rates and longer lifespans resulting in fewer workers contributing into the system relative to beneficiaries who are receiving payments today.
Congress has periodically made changes over the years aimed at shoring up the system’s finances including adjusting retirement age thresholds; raising payroll taxes; reducing benefit payouts etc., but more significant reforms will likely be required in coming decades if current trends continue unabated without further interventions from lawmakers or other stakeholders involved with SS policy making process.
In conclusion, Social Security is an essential program that provides financial support for many Americans both during their working years and throughout retirement. Understanding eligibility requirements, benefit amounts & types available (including spousal/survivor options), healthcare coverage under Medicare upon reaching age 65+ yrs old , tax implications associated with receiving SS entitlements each year alongside considerations on how best one should claim them – either earlier or later than FRA depending on individual circumstances- can help ensure that individuals make informed decisions about their finances when it comes time to claim these important benefits.