Article
Social Security
Our Government Pension
Social Security is a federal program designed to provide financial assistance to retirees, disabled individuals, and survivors of deceased workers. It is funded through payroll taxes collected from employees and employers. For many retirees, Social Security benefits form a crucial part of their retirement income.
Eligibility for these benefits depends on several factors, including age, work history, and disability status. We will explore the various categories of individuals who can draw Social Security benefits and the specific requirements for each category.
Social Security was never meant to be a sole retirement income source.
Generally, you need to have worked for at least ten years and earned a certain number of credits to qualify. The amount of benefits you receive is based on your lifetime earnings and the age at which you start claiming benefits.
Retirement benefits are the most well-known type of Social Security benefits, and they are available to individuals who have reached a certain age and have a sufficient work history.
Your Social Security benefit amount increases the longer you wait to start receiving them. Early retirement age (ERA) is 62. Starting Social Security benefits early will reduce your monthly benefit income by about 30%, compared to FRA. For every year you wait, until age 70, you will gain approximately 8% more. Full retirement age (FRA) depends on what year you were born. If born after 1959, it is 67. Delaying benefits past the FRA can increase the monthly payment up to age 70, which is the maximum benefit age (MBA). Starting Social Security at 70 vs, 67 can yield about 25% more monthly benefit income.
Example for average income earners:
Starting 62 = $ 1315/mo.
Starting 67 = $ 1932/mo.
Starting 70 = $ 2433/mo.
Determining the best time to start Social Security retirement depends on several factors, do you require the income and what age you expect to live to are the biggest factors. Those that are not heavily dependent on the monthly income, may look at the total possible amount received over a lifetime. Using the amounts above we will calculate total lifetime Social Security receive based on death age.
| Start / death age | 70 | 75 | 80 | 90 |
|---|---|---|---|---|
| 62 | $126,240 | $205,140 | $284,040 | $441,840 |
| 67 | $69,557 | $185,488 | $301,417 | $533,277 |
| 70 | $0 | $146,038 | $292,076 | $584,153 |
As stated above, the more taxable income you earned, paid into Social Security, the more you are eligible to receive.
Example for above average income earners:
Starting 62 = $ 2200/mo.
Starting 67 = $ 3232/mo.
Starting 70 = $ 4072/mo.
| Start / death age | 70 | 75 | 80 | 90 |
|---|---|---|---|---|
| 62 | $211,200 | $343,200 | $475,200 | $739,200 |
| 67 | $116,370 | $310,322 | $504,273 | $892,176 |
| 70 | $0 | $244,322 | $488,645 | $977,291 |
To qualify for retirement benefits, an individual must be at least 62 years old and have earned enough work credits by paying Social Security taxes. Typically, 40 credits, equivalent to about 10 years of work, are needed to qualify for benefits.
Don't forget to take inflation into account as well. You should work until you can afford to retire, not because you simply don't want to work anymore. You can get very close estimates of what your benefit would be by logging onto the Social Security Administration website.
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Social Security Disability Insurance (SSDI) provides benefits to individuals who are unable to work due to a severe disability that is expected to last at least one year or result in death.
To qualify for SSDI, the applicant must have a medical condition that meets the Social Security Administration's (SSA) definition of disability. This means the condition must be severe enough to prevent the individual from performing any substantial gainful activity.
Similar to retirement benefits, SSDI requires that the individual has earned enough work credits. The number of credits needed varies based on the age at which the individual becomes disabled, but generally, a younger person will require fewer credits than an older person.
Survivor benefits are available to the family members of deceased workers and provide financial support to help them cope with the loss of income.
Survivor benefits can be paid to:
- Widows and widowers, starting at age 60 (or age 50 if disabled)
- Unmarried children under 18 (19 if still in high school)
- Adult children who were disabled before age 22
- Dependent parents aged 62 or older
The deceased worker must have earned enough work credits for their family members to be eligible for survivor benefits. The number of credits required depends on the worker's age at the time of death, but fewer credits are needed for younger workers.
Supplemental Security Income (SSI) is a needs-based program that provides financial assistance to elderly, blind, or disabled individuals with limited income and resources, regardless of their work history.
To qualify for SSI, an individual must be 65 or older, blind, or disabled according to the SSA's definition.
SSI eligibility is determined based on the individual's income and resources. The SSA sets specific limits on the amount of income and resources an applicant can have and still qualify for SSI.
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Spousal benefits allow the spouse of a retired or disabled worker to receive benefits based on the worker's earnings record.
A spouse can receive spousal benefits as early as age 62, but, similar to retirement benefits, the amount will be reduced if claimed before the FRA.
The worker must be entitled to Social Security retirement or disability benefits for their spouse to qualify for spousal benefits.
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Divorced individuals may also be eligible for spousal benefits based on their ex-spouse's earnings record.
To qualify for divorced spousal benefits, the marriage must have lasted at least 10 years, the individual must be unmarried, and their ex-spouse must be entitled to Social Security retirement or disability benefits.
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