Social Security: Understanding The Benefits

Authored By: Social Security Benefits
"Understanding the Benefits" by the U.S. Social Security Administration "Survivor Benefits" by the Social Security Administration Information

"Understanding the Benefits" by the U.S. Social Security Administration: www.ssa.gov

"Survivor Benefits" by the Social Security Administration: www.ssa.gov


Social Security: A Simple Concept

Social Security helps older Americans, workers who become disabled, and families in which a spouse or parent dies. Today, about 167 million people work and pay Social Security taxes and about 59 million people receive monthly Social Security benefits.
Most of our beneficiaries are retirees and their families—about 42 million people. But Social Security was never meant to be the only source of income for people when they retire. Social Security replaces about 40 percent of an average wage earner’s income after retiring, and most financial advisors say retirees will need 70 percent or more of pre-retirement earnings to live comfortably. To have a comfortable retirement, Americans need more than Social Security. They also need private pensions, savings, and investments.
The current Social Security system works like this: when you work, you pay taxes into Social Security. We use the tax money to pay benefits to:

• People who already have retired;
• People who are disabled;
• Survivors of workers who have died; and
• Dependents of beneficiaries.
The money you pay in taxes isn’t held in a personal account for you to use when you get benefits. We use your taxes to pay people who are getting benefits right now. Any unused money goes to the Social Security trust funds, not a personal account with your name on it.

Where your Social Security tax dollars go

When you work, 85 cents of every Social Security tax dollar you pay goes to a trust fund that pays monthly benefits to current retirees and their families and to surviving spouses and children of workers who have died. The other 15 cents goes to a trust fund that pays benefits to people with disabilities and their families. From these trust funds, Social Security also pays the costs of managing the Social Security programs.


How you become eligible for Social Security

As you work and pay taxes, you earn Social Security “credits.” In 2015, you earn one credit for each $1,220 in earnings—up to a maximum of four credits a year. The amount of money needed to earn one credit usually goes up every year. Most people need 40 credits (10 years of work) to qualify for benefits. Younger people need fewer credits to be eligible for disability benefits or for their family members to be eligible for survivors benefits when the worker dies.
Social Security benefits only replace some of your earnings when you retire, become disabled, or die. Your benefit payment will be based on how much you earned during your working career. Higher lifetime earnings result in higher benefits. If there were some years when you didn’t work, or had low earnings, your benefit amount may be lower than if you worked steadily.

If you work and get benefits

You can continue to work and still receive retirement benefits. Your earnings in (or after) the month you reach full retirement age won’t reduce your Social Security benefits. In fact, working beyond full retirement age can increase your benefits. We’ll have to reduce your benefits, however, if your earnings exceed certain limits for the months before you reach your full retirement age. 
If you work, but start receiving benefits before full retirement age, we deduct $1 in benefits for each $2 in earnings you have above the annual limit. In 2015, the limit is $15,720. Once you reach full retirement age, you can keep workingand your Social Security benefit will not be reduced no matter how much you earn.

Benefits for your Family

When you start receiving Social Security retirement or disability benefits, other family members also may be eligible for payments. For example, benefits can be paid to your husband or wife:
•If he or she is age 62 or older; or
•At any age if he or she is caring for your child (the child must be younger than 16 or disabled and entitled to Social Security benefits on your record).
Benefits can also be paid to your unmarried children if they’re:
• Younger than 18;
• Between 18 and 19 years old, but in elementary or secondary school as full-time students; or
• Age 18 or older and severely disabled (the disability musthave started before age 22).
If you become the parent of a child (including an adopted child) after you begin receiving benefits, let the Social Security Administration know about the child, so they can decide if the child is eligible for benefits.

When to Apply for Benefits

You should apply for benefits about three months before the date you want your benefits to start.To file fordisability or survivors benefits, you should apply as soon as you’re eligible.