Understanding Social Security

Approximately 67 million people today receive
some form of Social Security benefits, including retirement, disability,
survivor, and family benefits. (Source: Fast Facts & Figures About Social
Security, 2018) Although most people receiving Social Security are retired, you
and your family members may be eligible for benefits at any age, depending on
your circumstances

How does Social Security work?

The Social Security system is based on a
simple premise: Throughout your career, you pay a portion of your earnings into
a trust fund by paying Social Security or self-employment taxes. Your employer,
if any, contributes an equal amount. In return, you receive certain benefits
that can provide income to you when you need it most–at retirement or when you
become disabled, for instance. Your family members can receive benefits based
on your earnings record, too. The amount of benefits that you and your family
members receive depends on several factors, including your average lifetime
earnings, your date of birth, and the type of benefit that you’re applying for.

Your earnings and the taxes you pay are
reported to the Social Security Administration (SSA) by your employer, or if
you are self-employed, by the Internal Revenue Service. The SSA uses your
Social Security number to track your earnings and your benefits.

You can find out more about future Social
Security benefits by signing up for a my Social Security account at the Social
Security website, ssa.gov, so that you can view your online Social Security
Statement. Your statement contains a detailed record of your earnings, as well
as estimates of retirement, survivor, and disability benefits. If you’re not
registered for an online account and are not yet receiving benefits, you’ll
receive a statement in the mail every year, starting at age 60. You can also
use the Retirement Estimator calculator on the Social Security website, as well
as other benefit calculators that can help you estimate disability and survivor

Social Security eligibility

When you work and pay Social Security taxes,
you earn credits that enable you to qualify for Social Security benefits. You
can earn up to 4 credits per year, depending on the amount of income that you
have. Most people must build up 40 credits (10 years of work) to be eligible
for Social Security retirement benefits, but need fewer credits to be eligible
for disability benefits or for their family members to be eligible for survivor

Your retirement benefits

Your Social Security retirement benefit is
based on your average earnings over your working career. Your age at the time
you start receiving Social Security retirement benefits also affects your
benefit amount. If you were born between 1943 and 1954, your full retirement
age is 66. Full retirement age increases in two-month increments thereafter,
until it reaches age 67 for anyone born in 1960 or later.

But you don’t have to wait until full
retirement age to begin receiving benefits. No matter what your full retirement
age, you can begin receiving early retirement benefits at age 62. Doing so is
sometimes advantageous: Although you’ll receive a reduced benefit if you retire
early, you’ll receive benefits for a longer period than someone who retires at
full retirement age.

You can also choose to delay receiving
retirement benefits past full retirement age. If you delay retirement, the
Social Security benefit that you eventually receive will be as much as 8
percent higher. That’s because you’ll receive a delayed retirement credit for
each month that you delay receiving retirement benefits, up to age 70. The
amount of this credit varies, depending on your year of birth.

Disability benefits

If you become disabled, you may be eligible
for Social Security disability benefits. The SSA defines disability as a
physical or mental condition severe enough to prevent a person from performing
substantial work of any kind for at least a year. This is a strict definition
of disability, so if you’re only temporarily disabled, don’t expect to receive
Social Security disability benefits–benefits won’t begin until the sixth full
month after the onset of your disability. And because processing your claim may
take some time, apply for disability benefits as soon as you realize that your
disability will be long term.

Family benefits

If you begin receiving retirement or
disability benefits, your family members might also be eligible to receive
benefits based on your earnings record. Eligible family members may include:

Your spouse age 62 or older, if married at
least 1 year

Your former spouse age 62 or older, if you
were married at least 10 years

Your spouse or former spouse at any age, if
caring for your child who is under age 16 or disabled

Your children under age 18, if unmarried

Your children under age 19, if full-time
students (through grade 12) or disabled

Your children older than 18, if severely

Each family member may receive a benefit that
is as much as 50 percent of your benefit. However, the amount that can be paid
each month to a family is limited. The total benefit that your family can
receive based on your earnings record is about 150 to 180 percent of your full
retirement benefit amount. If the total family benefit exceeds this limit, each
family member’s benefit will be reduced proportionately. Your benefit won’t be

Survivor benefits

When you die, your family members may qualify
for survivor benefits based on your earnings record. These family members

Your widow(er) or ex-spouse age 60 or older
(or age 50 or older if disabled)

Your widow(er) or ex-spouse at any age, if
caring for your child who is under 16 or disabled

Your children under 18, if unmarried

Your children under age 19, if full-time
students (through grade 12) or disabled

Your children older than 18, if severely

Your parents, if they depended on you for at
least half of their support

Your widow(er) or children may also receive a
one-time $255 death benefit immediately after you die.

Applying for Social Security benefits

The SSA recommends apply for benefits online
at the SSA website, but you can also apply by calling (800) 772-1213 or by
making an appointment at your local SSA office. The SSA suggests that you apply
for benefits three months before you want your benefits to start. If you’re
applying for disability or survivor benefits, apply as soon as you are

Depending on the type of Social Security
benefits that you are applying for, you will be asked to furnish certain
records, such as a birth certificate, W-2 forms, and verification of your
Social Security number and citizenship. The documents must be original or
certified copies. If any of your family members are applying for benefits, they
will be expected to submit similar documentation. The SSA representative will
let you know which documents you need and help you get any documents you don’t
already have.

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