Social Security and frequent questions seem to go hand in hand. If you currently pay Social Security taxes, you’re probably curious about drawing Social Security income at some point in the future. Review the Social Security Handbook online here to answer many frequent questions about Social Security, including:
Why must I pay Social Security taxes?
When can I receive Social Security benefits?
How is my eligibility for Social Security benefits determined?
How much money can I receive from Social Security?
May I receive Social Security benefits if I’m employed?
How does this affect my spouse’s current or future Social Security benefits?
Is the Social Security program in sound financial health?
Question 1: Why must I pay Social Security taxes?
Social Security was originally established in the 1930s Depression era to provide a reliable income stream to specific workers. The program was positively received and the government expanded it to include most members of the U.S. workforce. Before the rollout of Social Security, American workers were required to fund a future retirement by saving in their work years. If he or she didn’t save enough, it was difficult to retire without family assistance.
Social Security is a complex financial program with many facets and components. The reason you must pay Social Security taxes is relatively simple, however. Social Security is designed as a pay as you go program. Currently employed taxpayers pay in to partially fund the needs of current U.S. retirees.
As more Baby Boomer individuals retire and access Social Security, a smaller number of working individuals are paying into the system. For these reasons, adjustments to the current Social Security program may occur in the future.
For this reason and others, it’s important to save as much as possible in tax-deferred and/or tax-sheltered retirement savings accounts for your future. As more Americans live longer, healthier lives, it’s important to plan for a retirement than could span 20 or 30 plus years. In the interim, saving for retirement can boost your financial net worth.
Question 2: When can I receive Social Security benefits?
Your age determines when you can receive Social Security benefits. If you’re planning an early retirement, you can elect partial benefits at age 62. If you want full benefits, you’ll need to work until your 67th birthday or later depending upon the year you were born:
If you were born before 1938, you can receive full Social Security benefits at age 65.
If you were born between 1943 and 1943, you can request full Social Security benefits on your 66th
If you were born between 1955 and 1960, your eligibility for full Social Security benefits increases two months each year.
If you’re a mid-Baby Boomer born in or after 1960, receipt of full Social Security benefits begins on your 67th
If you become disabled or suffer a serious illness that your doctor estimates will last at least 12 months, it is possible to request Social Security disability benefits. You can request Social Security disability benefits at any age.
Question 3: How is my eligibility for Social Security benefits determined?
Your eligibility for benefits is determined by credits you earned by paying into Social Security during the years you worked. In 2016, Social Security gives one credit for each USD 1,260 of earned income. Each worker can receive up to four credits a year.
Question 4: How much money can I receive from Social Security?
Social Security calculates your benefits based on an average of the 35 highest earning years. In 2016, an average retired worker receives USD 1,341 a month in Social Security benefits. The amount can rise depending upon future Cost of Living (COLA) adjustments.
Question 5: May I receive Social Security benefits if I’m employed?
Yes, within certain parameters. After you reach the age at which full Social Security benefits may be received, it’s possible for you to continue employment without lowering monthly Social Security benefits. For instance, you can earn USD 15,270 in addition to your benefits in 2016.
However, for each USD 2 above the limit, your benefits will decline by USD 1. In the year you’re eligible for full Social Security retirement benefits, you’re allowed to earn up to USD 41,880. Consult a financial adviser about your specific financial circumstances.
Question 6: How does this affect my spouse’s current or future Social Security benefits?
If your spouse has worked and paid into Social Security, it’s possible for both of you to qualify for Social Security benefits. If he or she didn’t work or earned a smaller amount than you, your spouse’s benefit will be less than your own.
If your spouse dies and you want to access his or her Social Security earnings, you’re entitled to 100 percent of his or her basic Social Security benefit amount. If you’re a surviving spouse and haven’t reached Social Security retirement age, you will receive a prorated amount until that time. If your deceased spouse received higher Social Security benefits, you as the survivor receive a higher benefit amount in that case.
Question 7: Is the Social Security program in sound financial health?
According to the U.S. Bureau of Labor Statistics (BLS), the average retiree in the 1930s was expected to live 10 years or less after retirement. Today’s retirees are living much longer. The U.S. government says that working Americans should anticipate adjustments to the Social Security program in the coming years.
Unfortunately, your Social Security taxes aren’t held in an interest-bearing account for your sole use in the future. If the total amount of Social Security taxes collected exceed the amount needed to pay current Social Security benefits, the government deposits the remainder into one of two funds–the Old Age and Survivors Insurance Trust Fund (OASI) and the Disability Insurance Trust Fund (DI).
Social Security Frequent Questions
These questions and others are a place to start your Social Security benefits research. If you’re not receiving a Social Security statement, contact your local Social Security office. Check your Social Security credits and income history to ensure it is correct. Immediately notify Social Security if your statement isn’t correct.