Beau Browning | October 3rd, 2022
Social Security: Everything You Need To Know
The words “Social Security” encompass several things, and the system can be confusing. We’ll explain everything you need to know about Social Security.
Social Security Benefits
When most people hear “Social Security,” they think of retirement benefits, but the program offers three distinct categories of benefits.
Retirement Benefits
- Available to workers aged 62 and over who have earned at least 40 credits
- Eligible Family Members: Can claim benefits based on your work record if claiming such would pay more than the benefit based on their own work record
- Those Eligible:
- Spouses
- Former spouses, if married for at least ten years and have not remarried
- Children under 18 or up to 19 if still attending high school
- Children of any age who were disabled before age 22 who are not earning more than $1,260 per month, have a medical condition resulting in severe functional limitations expected to last at least one year or result in death
- Spouses and former spouses must be at least age 62 to claim benefits, and spouses and children must wait for the worker to claim benefits before they can claim family benefits based on the worker’s record
How Much Will You Receive?
Retirement benefits depend on your average indexed monthly earnings (AIME) during the 35 years you were earning the most income, so payments vary widely. The average payment is $18,506.64 per year.
For each year you delay collecting benefits starting from age 62 and ending at age 70, the payment amount increases 8% each year of the delay. The annual maximum benefit for those aged 62 is $28,368; for those aged 70, it’s $50,328.
Each year there is a cost of living adjustment (COLA) increase that is tied to inflation. The increase for 2023 is expected to be between 8% and 10%.
For low-earners, there is a minimum benefit. Earners must have had income for at least 11 years to be eligible. Currently, the benefit is $546 per year and increases for each year of low-income work over the required 11 years, with a maximum of $11,409.60 per year for those who worked for 30 years.
Disability Benefits
- Available to those ages 18 and over who cannot work because of a physical or mental disability that is expected to persist for at least one year or result in death
- Depending on the age at the time of the disability, you may be eligible even without having earned 40 credits. The benefit is based on your average lifetime earnings, so those who earned more while working will receive a larger benefit.
- The average yearly payment for an individual is $16,296; for recipients with a spouse and children, it’s $28,596
- To qualify, you must provide the Social Security Administration (SSA) information regarding your work history and medical or mental condition that prevents you from working
- If you are found to be disabled, you will receive benefits for the duration of the condition, which may be for your lifetime
- Family members may be eligible to claim benefits based on a disabled worker’s record if they are:
- A spouse aged 62 or older or of any age if they provide care for a disabled worker’s disabled child age 16 or under
- Former spouses who were married for at least ten years and have not remarried if they meet the same criteria as spouses
- Unmarried children up to age 18 or 19 if still high school students
- Children of any age disabled before the age of 22
Survivor Benefits
- Available to certain family members of a deceased worker who qualified for Social Security
- The amount of the benefit depends on the state, with an average of $999 for young widows/widowers and $885 for children
- Family members may be eligible to claim benefits based on a disabled worker’s record if they are:
- Surviving spouse aged 60 or older (50 or older if disabled) or of any age if they provide care for a deceased worker’s disabled child age 16 or under or disabled
- Former spouses who were married for at least ten years and have not remarried if they meet the same criteria as spouses
- Children up to age 18 or 19 if still high school students
- Children of any age disabled before the age of 22
- Parents of the deceased worker, if the worker provided 50% or more of their financial support prior to the worker’s death
- Surviving spouse or children may receive a one-time death benefit of $25
How Social Security Works
Social Security is often called a benefit plan, but it can be better termed an insurance plan. Workers pay into the program via payroll withholding, and self-employed workers pay Social Security taxes when filing their federal tax returns.
Workers can earn up to four credits per year. Currently, a credit equals $1,510 so the required 40 credits to earn retirement benefits (the low-earners minimum benefit excepted) is equal to $60,400.
When you’re ready to apply for retirement benefits, you can do so online. The information will be verified, and if you are approved, you’ll start receiving benefits.
The Future of Social Security
There is a lot of fear that Social Security could “run out of money.” The system currently has a reserve that is not expected to run out until 2035. And that doesn’t mean the program is out of money, just that the reserve has run out. The program will continue to bring in money through payroll, and Social Security taxes workers pay each year.
If that happened, the system would still pay out about 80% of the benefits people receive each month. But whatever government is in place does not want to be the government that “let Social Security run out,” so there are various plans to prevent that from happening.
Social Security and Your Retirement
There are a lot of factors to consider when factoring Social Security benefits into your retirement planning; what age should you start taking benefits, can you continue to work and receive benefits, and how much shortfall will there be between your benefits and your retirement budget?
If you have questions about Social Security and your retirement plan, coreVISION is here to help. We can help you devise a plan so you can have the kind of retirement you’re dreaming of.