“Social Security” is the term used for the Old-Age, Survivors, and Disability Insurance (OASDI) program which is run by federal agency, the Social Security Administration (SSA). It is best known for retirement benefits, but it also provides survivor benefits and income for workers who become disabled. Every U.S. natural-born citizen receives a Social Security card with their identifying number at birth. This number is nine digits long and its first three digits correspond to the area of the U.S. where you were born.
HOW DOES SOCIAL SECURITY WORKS?
Social Security is an insurance program. Workers pay into the program, typically through payroll withholding where they work. Self-employed workers pay Social Security taxes when they file their federal tax returns. The money that workers pay in taxes while working goes into the Social Security trust to pay for the benefits of those already receiving them. It is not set aside in an account for you.
As a worker, you need 10 years of work (40 credits) to qualify for benefits. Each work credit is based on your earnings. In 2022, you earn one credit for each $1,510 earned during the year, up to a maximum of four credits. That money goes into two Social Security trust funds—the Old-Age and Survivors Insurance Trust Fund (OASI) for retirees and the Disability Insurance Trust Fund (DI) for disability beneficiaries—where it is used to pay benefits to people currently eligible for them. The money that is not spent remains in the trust funds.
If you were born in 1960 or later, your full retirement age equals 67. You can start receiving benefits from the age of 62, but only around 70% of your full benefit. You will receive full benefit if you claim them when you reach full retirement age.
TYPES OF SOCIAL SECURITY BENEFITS
Social Security provides benefits to 3 groups of people: retirees, their survivors, and workers who become disabled.
Retirement Benefits
Workers who have paid into the Social Security system for at least 10 years become eligible for early retirement benefits at age 62. Waiting until your full retirement age, which is between 66 and 67 depending on when you were born, results in higher monthly benefits. If you delay collecting retirement benefits to age 70, then you will receive even more, but benefits don’t increase if you wait longer than that.
Spouses can also claim benefits based on either their own earnings record or their spouse’s. A divorced spouse who is not currently married can receive benefits based on an ex-spouse’s earnings record if the marriage lasted at least 10 years. Children of retirees can also receive benefits until they turn 18 (longer if the child is disabled or a student). The cutoff is 16 if you are caring for a child who is not your own.
How much you can get in your Social Security retirement benefit depends on your average indexed monthly earnings (AIME) during your 35 highest-earning years. Regarding this, amounts will differ significantly among retirees. The average monthly benefit as of June 2022 was $1,542.22.
Your annual amount increases by 8% for each year you delay collecting benefits, starting at age 62 and stopping at 70. In 2022 the maximum monthly benefit for people age 62 is $2,364, while for people age 70 it is $4,194. In 2022, your benefit will increase by 5.9%.
Disability Benefits
People who can’t work due to a physical or mental disability that is expected to last for a year or more – or result in death – may be eligible for Social Security disability benefits (SSDI). To qualify, you generally have to meet certain earnings tests. Family members of disabled workers can also be eligible.
In 2022, around nine million Americans were collecting SSDI. The average monthly benefit was $1,228.87. For disabled workers, the monthly average was $1,361.88. Spouses of disabled workers received an average of $377.02 monthly, and children of disabled workers got $430.36 monthly.
Survivor Benefits
The spouse and children of a deceased worker may be eligible for survivor benefits based on the worker’s earnings record. That includes surviving spouses who are 60 or older, or 50 or older and disabled, provided they have not remarried. A surviving spouse who is caring for a child who is younger than 16 or disabled may be eligible for these benefits too. For children to receive benefits, they must generally be younger than 18 or disabled.
- Children of deceased workers: $982 monthly
- Widowed mothers and fathers: $1,128.77 monthly
- Nondisabled widow: $1,562.09 monthly
- Disabled widow: $819.06 monthly
- Parents of deceased workers: $1,396.43 monthly
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