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Your Guide to Social Security Benefits
Key Takeaways
Strategies to Enhance Your Social Security Income
Many look forward to retirement as a time to slow down, pursue personal interests, and reflect on the accomplishments of decades of hard work. As we enter our “golden years” we tend to shift our focus to the things that truly matter - spending time with family, traveling, pursuing our hobbies, and giving back to our communities. Social Security benefits provide a safety net that allows you to enjoy these activities without worrying about financial burdens.
While Social Security is often associated with seniors, it also serves individuals with disabilities, the families of deceased workers, and certain dependents. For many, navigating the various Social Security programs and their benefits can be an intimidating process. Our goal is to improve your understanding of this system - allowing you to make informed decisions about your future. In this social security guide, we’ll discuss the history of Social Security, explore the qualifications for different types of benefits, and delve into some strategies for optimizing your income from this system.
How Does the Social Security System Work?
The multiple programs and complex requirements of Social Security can make the system feel like a maze. Read on to uncover some of the most important features and aspects of Social Security:
Social Security is primarily funded through payroll taxes, with both employees and employers contributing a percentage of wages to the program. If an individual is self-employed, they’re required to pay both the employee and employer portions of the tax. These taxes are deposited into two trust funds: the Old-Age and Survivors Insurance (OASI) Trust Fund - which pays retirement and survivors benefits - and the Disability Insurance (DI) Trust Fund, which provides disability benefits.
To qualify for Social Security benefits, you are required to have earned a certain number of credits over your working life. These credits are based on annual earnings, with the amount required to earn a credit adjusted yearly. Most people need 40 credits (equivalent to roughly 10 years of work) to be eligible for retirement benefits. The work credit requirements for disability and survivors benefits may be lower, depending on the age the worker requires these benefits.
Your Social Security benefits for retirement and SSDI are calculated based on your lifetime earnings. The SSA averages your 35 highest-earning years (indexed to account for wage inflation) to determine your average indexed monthly earnings. This amount is then used in a formula to calculate your primary insurance amount, which serves as the basis for your monthly benefit amount.
However, Supplemental Security Income (SSI) benefits are not calculated based on your lifetime earnings. Because SSI is a needs-based program, the benefit amount you receive is determined by your countable (earned and unearned) income and the Federal Benefit Rate (FBR).
You can begin claiming Social Security retirement benefits as early as age 62. However, we don't recommend doing so, as this decision will result in a permanently reduced benefit amount. Waiting until your full retirement age (between 66 and 67, depending on your birth year) will allow you to receive full benefits. Even better, if you’re able to delay claiming benefits beyond your full retirement age, you can earn delayed retirement credits. This increases your retirement benefit amount by a certain percentage for each month you wait, up to age 70.
To ensure that Social Security benefits keep up with inflation, the SSA implements annual cost-of-living adjustments. These COLAs are based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) and are applied to benefit payments each year, typically starting in December.
Social Security Benefits Breakdown:
Determine Your Eligibility for Different Programs.
Considering the abundance of Social Security programs, identifying the ones you might qualify for can be challenging. Below, we’ve outlined the various Social Security benefits programs and the factors that determine eligibility for each.
Retirement benefits are the cornerstone of the Social Security program. These benefits, which are calculated based on an applicant’s 35 highest-earning years, provide a generous monthly income to eligible retirees for the remainder of their lives and allow them to maintain their standard of living. Your overall monthly benefit amount depends on a variety of factors, including your lifetime earnings and the age you start receiving benefits under Social Security. Under certain circumstances, Social Security retirement benefits can also extend to spouses, ex-spouses, and dependent children.
How Can I Qualify For Retirement Benefits?
To be eligible for retirement benefits, you typically need to have earned 40 credits (equivalent to 10 years of work) and reached the minimum claiming age of 62. However, waiting until your full retirement age (between 66 and 67) or later will yield higher monthly benefits.
SSDI serves as an essential safety net for individuals who are unable to work due to a long-term or permanent disability. This program’s steady stream of financial assistance allows those with limiting disabilities to navigate life with dignity, independence, and a sense of security. In some cases, the family members of the disabled individual may also be eligible for benefits.
How Can I Qualify For SSDI?
Eligibility for SSDI is based on your work history and the severity of your disability. The number of work credits required by the SSA varies depending on the age at which the disability occurs. In addition, your disability must meet the SSA’s strict medical criteria in that it prevents you from engaging in any form of substantial gainful activity (SGA).
SSI is a need-based Social Security program that provides federal aid to low-income individuals who are elderly, blind, or disabled. SSI benefits are intended to help these individuals meet basic needs for food, clothing, and shelter.
How Can I Qualify For SSI?
Unlike SSDI, eligibility for SSI is not based on your work history but rather on financial need, determined by strict income and resource limits. Furthermore, you must meet the SSA’s age or disability requirements to qualify. Some applicants are eligible to receive SSI and SSDI benefits at the same time. To qualify for these concurrent benefits, you’re required to meet both the medical eligibility criteria for SSDI and the income and resource limits for SSI.
Social Security also offers financial assistance to the surviving relatives of workers who have passed away. Survivors benefits, determined based on the deceased worker's earnings history, may be available to widows, widowers, and dependent children.
How Can I Qualify For Survivors Benefits?
Eligibility for survivors benefits is determined by the survivor’s relationship to the deceased worker, the age of the survivor, and the circumstances the survivor has been left in (ex: disabled or caring for a minor child). You can claim Social Security survivors benefits as early as age 60 (or age 50 if disabled), while children can receive benefits up to age 18 (19 if still in high school).
How Can I Supplement My Retirement Income and Maximize My Security Benefits?
Take Advantage of Medicare
While not directly a part of the Social Security program, Medicare is a federal health insurance program for people aged 65 and older, as well as certain younger individuals with disabilities. Medicare is divided into four parts: Part A (hospital insurance), Part B (medical insurance), Part C (Medicare Advantage plans), and Part D (prescription drug coverage). This program ensures access to essential medical services to those who might otherwise be overwhelmed by the mounting costs of healthcare. For millions of Americans, Medicare eases the emotional and financial strain that often accompanies aging and disability.
How Can I Qualify for Medicare?
Most individuals become eligible for Medicare when they reach age 65 and have paid Medicare taxes for at least 10 years. However, the program is also extended to younger individuals with severe qualifying disabilities. To meet the minimum requirements, an individual must be a U.S. citizen or a legal resident who has lived in the United States for at least five years. If you have worked and paid into Medicare for a minimum of 10 years (40 quarters), Medicare Part A is available without a premium. Enrolling in Medicare Part B, Part C, and Part D may require you to pay monthly premiums.
Continue Part-Time Work
While retirement is a time to relax and enjoy the results of our labor, it can also usher in financial uncertainty. One way to supplement your retirement income - with or without Social Security - is to work part-time. Some retirees work part-time as a consultant in their former field - and many try out self-employment or entrepreneurship. Searching for a part-time job like bookkeeping or substitute teaching allows you the opportunity to earn additional income while maintaining your ability to enjoy generous free time to pursue your hobbies and interests.
Stay Up-To-Date on Your Estimated Benefits
Your Social Security retirement benefits are calculated based on your lifetime earnings. You can create an online account at the Social Security Administration (SSA) website to access your earnings record and stay up-to-date on your estimated benefits. It's extremely important that you review your Social Security earnings record regularly to ensure accuracy and address any discrepancies. Making this a habit early on can help you to be as prepared as possible for your retirement - and avoid any nasty surprises down the line.
Optimize Your Social Security Claiming Strategy
When it comes to claiming your Social Security benefits, timing is everything! The age at which you claim Social Security benefits can significantly impact your retirement income. Although you can start claiming benefits as early as age 62, waiting until your full retirement age (FRA) can make a drastic difference in your monthly benefits. Claiming benefits before reaching your FRA will result in a permanent reduction in your monthly benefit amount - as much as 30%, depending on how early you claim.
To make a strategic, informed decision, you should carefully review your financial situation, life expectancy, and retirement goals, factoring in your current health, potential sources of income, and if applicable, the needs of your dependents. If you can afford to delay claiming benefits beyond your full retirement age, you can earn delayed retirement credits, increasing your Social Security benefit amount by a certain percentage for each month you wait, up to age 70.
Coordinate Spousal Benefits
For married couples, strategically coordinating spousal benefits can greatly enhance your combined Social Security income. Spousal benefits allow you to claim benefits based on your spouse’s earnings record, which can be especially advantageous if there is a significant difference in lifetime earnings between you and your partner. Before accepting spousal benefits, consider both your and your partner's age, work history, and eligibility for additional benefits.
Consider the Impact of Taxes on Your Benefits
Depending on your income level, a portion of your Social Security may be subject to federal income tax. It would be wise to familiarize yourself with these tax thresholds so you can plan accordingly. Consulting with a Social Security tax professional or Social Security attorney can help you minimize the impact of taxes on your Social Security benefits and overall retirement income.
Need Help With Your Claim? Contact a Wettermark Keith Social Security Attorney.
Wettermark Keith, with offices located throughout Alabama, Tennessee, and Florida, has an excellent reputation as one of the most accomplished personal injury firms in the country. Our reach is not only regional but includes a diverse range of practice areas, including premises liability law, personal injury cases, auto wrecks, trucking wrecks, insurance dispute claims, nursing home abuse, medical malpractice, on-the-job injuries, social security disability, and veterans’ disability claims, to name just a few.
At Wettermark Keith, we believe in taking cases personally. Our purpose is to practice with care and compassion- to tell our clients’ stories and make their voices heard. We do this by building strong relationships based on constant communication and an unwavering dedication to truth and trust. You should never wonder what’s going on with your case. Our attorneys will keep you in the loop and represent you as if you are family- because to us, you are.
Frequently Asked Questions
Your lifetime earnings - with inflation taken into account - form the basis of your Social Security benefits. The SSA combines the average indexed monthly earnings during your 35 highest-earning years with your primary insurance amount (PIA) and calculates your benefits using a formula. To check your projected amount of benefits, you can register for an account on the SSA website.
At age 62, you can begin receiving retirement benefits. However, if you begin receiving benefits prior to reaching your full retirement age (which varies based on your birth year) your payments will be decreased. Those who were born in the years 1943 to 1954 have a full retirement age of 66 years old. For people who were born later - in 1960 or after - the full retirement age gradually lengthens to 67.
While working while collecting Social Security payments is possible, your benefits can be temporarily decreased if you earn more than the annual earning cap before your full retirement age (FRA). The year you reach FRA, this reduction in benefits decreases and the earning cap rises. After reaching your FRA, there’s no limit on how much you can make.
Your overall monthly benefits will be drastically reduced if you retire early. This reduction is determined by how many months you received benefits prior to your FRA and will impact your benefits for the rest of your lifetime. Under most circumstances, we do not advise retiring early.
You can accrue delayed retirement credits by delaying your Social Security benefits past your FRA. For every month you postpone receiving benefits (up to age 70), these credits raise your benefit amount by a particular percentage.
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