FDR signs the Social Security Act and makes it the law of the land;)
I’ve always thought the whole social security thing was confusing. How do they determine how much you get? Who can get it? When I was younger, I was actually receiving Social Security after my dad died. I was sixteen when it happened, and I received Social Security until I graduated from high school. I was receiving what I now know to be survivor benefits. There are three basic types of Social Security benefits, (1) Social Security retirement, (2) Social Security disability and (3) Survivor benefits.
The initial question is where the money comes from. The answer to that, perhaps obviously, is from taxes. The tax is shared by the employer and the employee – each of them pay 6.2% of the employees salary in a Social Security tax. If you’re self-employed, you’re stuck paying the entire 12.4%. Income a person makes above and beyond $90,000 per year (per individual) is not subject to a Social Security tax.
To receive social security retirement, you have to meet the requisite number of “credits.” To be eligible, you typically need at least 40 credits, or about 10 years (one per quarter). Then, you can start receiving retirement at age 62 (early retirement age). To receive full benefits however, you need to retire between 64 and 67, depending on when you were born. The later you were born, the older you need to be the receive full benefits.
Receiving social security disability, of course, is a process that depends on how long you’ve worked, the nature of your injury, and whether you can go back to work. From my limited exposure to this, I know it involves an application process and examination by a doctor. You can’t receive disability and retirement benefits, so if you’re receiving disability, it will become retirement when you reach the requisite age (I believe).
There are also survivor benefits for widows, widowers and/or children with deceased parents of certain ages. See all the scenarios here.
As for how they figure out how much you’ll get, I don’t think I can say it much better than they did, but I’ll try to summarize. Predictably, it’s based on your lifetime earnings. They basically average your earnings in your best 35 years and then apply some kind of “secret formula.” Read all about it here.
If you’re still awake, that’s Social Security in a nutshell. If you know something important that I failed to mention, please leave it in the comments, and I’ll try to add it to this post. Thanks for reading.
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An understanding of how Social Security works can help people maximize their SS benefits. A lot of people who dream of retiring early don’t realize that doing so will penalize them in terms of SS they can collect, even if they defer collecting SS until full retirement age.
For example, if you work beginning at age 20 and plan to retire early at age 50, you will only have accumulated 30 years of work. Since the SSA calculates your benefits based on 35 years of your highest income, those 5 years you haven’t worked will be counted as “O,” bringing your total earnings as calculated by SSA way down.
Even if you don’t plan an early retirement, you can increase your SS benefit by working beyond 35 years so that you have more peak earning years that can eliminate your lowest income years, probably when you were in your 20s, from the SSA benefit calculation.
There was just an article in Lawyer’s Weekly a few weeks ago about Social Security Survivor’s Benefits. A man had some sperm stored at a sperm bank. When he died, his wife used that sperm and was impregnated with her dead husband’s sperm. Once the child was born, the lady tried to apply for SS Survivor’s benefits. When she was denied, she appealed and it went further up the legal food chain. Turns out, since he was not the father of the child while he was alive, she does not count as a survivor.
Just a little social security fun-fact.