The Social Security Administration was created in August 1935 when President Franklin Roosevelt signed the Social Security Act. Initially, Social Security was supposed to provide retirement income to workers in the United States. However, the administration has expanded and nowadays people who qualify as disabled, including the families and spouses of workers who die in the line of duty, can benefit from the program.
ContentsWhat is social security? How Social Security Works How Much You Can Earn From Social Security Types of Social Security Benefits Disability Benefits SummarizeAlthough the program does not fully pay for your retirement, recent research has shown that Social Security provides 12% of retired men and 15% of retired women with 90% of their income. In comparison, 37% of men and 42% of elderly women derive 50% of their income from it. This tells you that this program is essential among the senior community. As such, it's important for everyone to know how it works, what benefits it includes, and how much they can get out of it when planning for retirement.
This article will cover all the Social Security facts to help you understand the essential basics.
Social Security is a federally administered program in the United States that aims to provide income security and health care to individuals and households during retirement, and in the event of disability, loss of breadwinner , accidents at work, maternity and incapacity.
Each party must meet a set of requirements to be eligible for Social Security benefits. For example, you cannot access your Social Security retirement benefits until you reach full retirement age (FRA). The retirement age depends on the year of your birth. For people born in 1955, the FRA is 66 years and two months, and it increases gradually for people born in 1960 to reach retirement age at 67.
Typically, you can't access your retirement benefits until age 62, and you must have contributed to your Social Security for ten or more years by then. Also, if you wait until age 70 to collect your Social Security, you get higher benefits than someone who took their benefits earlier.
Before you understand how Social Security works, you need to ask yourself who pays for it. Is the federal government stable and generous enough to take care of its citizens in large numbers? Well, unfortunately, no, the federal government does not fund the program.
Citizens fund the social security program through the payment of taxes. About 85% of your tax is guaranteed by social security. Additionally, employees pay for the program through payroll deductions, while the self-employed pay social security taxes when filing their tax returns.
This money does not go to an individual's account. Since you pay the money while you are still young, healthy and able to work, it is used to benefit retired, disabled or bereaved spouses and family who are in need at that time. When the time comes, your social security will be covered by the taxes of the younger generation. So you can't pay more taxes to accumulate more benefits. Additionally, any unused money is funneled into the Social Security Trust Fund, which is governed by a board of trustees.
Once the money is collected, your social security income is calculated in the form of credits. As of 2022, one credit equals $1,510 UDF, which is likely to increase each year. You can only accumulate four credits per year, which equals an amount of 6,040 USD. However, for full Social Security benefits, a single person is allowed to accumulate a maximum of 40 tokens. Ideally, to earn 40 tokens, you must have worked for at least ten years. So how much exactly can you earn with Social Security?
How much can I earn from Social Security? Well, it depends on two things:
The more you earn, the more social security tax deductions and the chance of reaching 40 tokens. Since not everyone has the privilege of having a well-paying job, you can compensate for your low income by working longer. The goal is to earn as many tokens as possible to enjoy more Social Security income.
Likewise, if you've had a period in your life where you haven't worked, working longer can help fill those gaps. It also makes it possible to meet the requirement of having worked for at least ten years to benefit from social security benefits.
Retirement age, in this case, is used to refer to the age at which you choose to start collecting your Social Security benefits. As stated above, the minimum age is 62. But the full retirement age is 66 years and two months for those born in 1955. However, the longer you wait to collect, the higher the monthly benefits. When you start receiving your benefits at age 62, monthly earnings are usually cut in half. It is therefore recommended to wait until at least the age of your full pension if you seek to benefit from a maximum of income.
In 2022, the maximum income you can receive monthly is $2,364 for those filing at age 62 and $3,345 for those awaiting full retirement age.
Now that you understand how Social Security works, it's time to learn about the different types of Social Security benefits provided by the federal government
This article has mainly focused on this type of social security benefit. As the name suggests, the program is for people retiring at a certain age. It covers part of retirement income. This means that you cannot rely on Social Security for your entire retirement. Experts recommend that you develop a retirement plan that will help you obtain other sources of income during your golden years.
In addition to the retiree, his spouse can also benefit from retirement social security. The spouse can either present his work file or that of his spouse. In addition, a divorced spouse who is not remarried can also benefit from the program.
The retiree's children are also beneficiaries. This is in the case where the child is disabled or is still a student. By law, a child is not entitled to pension benefits from his parents when he turns 16.
The Social Security Survivor's Allowance is intended for the spouse, children and family of a deceased person. Spouse must be 50 or older and not remarried to qualify for benefits. If the spouse is caring for a child aged 16 or under or who is disabled, he or she is eligible for the benefit.
This social security also benefits parents over the age of 62 who were dependent on the deceased worker. They can earn at least half of the worker's income. Under certain circumstances, adopted children, stepchildren, grandchildren and step-grandchildren may benefit from this program.
This program is for people who cannot work due to a mental or physical disability that is expected to last longer than a year. These people must be tested to determine if they qualify for Social Security benefits.
Family members of the disabled person are also beneficiaries of the program.
With the new knowledge gained about Social Security and how much you can get out of it, you are in a better position to plan for retirement. To get the most benefits, you can choose to work longer. But also remember that you need to find alternative options that can help supplement your Social Security retirement income.
