Social Security
Social Security was started in the late 1930s to guarantee that each retired worker over the age of 65 had a guaranteed source of income. Social Security has undergone many changes since then, but it still guarantees the right to receive payments after retirement. Both workers and employers fund the program and pay a percentage of the worker's salary into Social Security. However, those payments are not held in a separate account for you to use at your retirement. Funds collected today are used to fund current Social Security beneficiary payments.
Social Security has become an integral part of our society. Almost all workers are in jobs that are covered (taxed) by Social Security. Almost every current retiree receives Social Security benefit payments each month. For two-thirds of senior citizens, Social Security is their major source of income. There are three major components of Social Security: retirement benefits, disability benefits and Supplemental Security Income.
TIP: The Social Security Administration has numerous pamphlets and brochures to help seniors navigate the complex maze that is Social Security. Call their toll-free telephone number, 800.772.1213. The TYY telephone number is 800.325.0778. Or check their Web site for information and forms: www.ssa.gov. Either a phone call to the Social Security Administration or a visit to their Web site can lead you to your nearest Social Security office where you can speak to a representative in person.
Who is eligible for Social Security benefits?
You are generally eligible for Social Security benefits after you have worked a total of 10 years in work covered by Social Security. The work is "covered" by Social Security if both the employee and employer pay a tax to the Social Security Administration. You do not have to work for a continuous 10-year period. Your work time can accumulate over your life.
The Social Security Administration has different eligibility requirements for different types of employment. These different types include federal government employees, state government employees, self-employed persons, military personnel, farmers, nonprofit employees and overseas workers.
TIP: Visit your local Social Security office or go online at www.socialsecurity.gov/ssi/text-eligibility-ussi.htm/spotlights/spot-prerelease.htm for more detailed information.
I am self-employed. Am I still eligible for Social Security benefits?
Yes. Instead of an employer reporting your Social Security taxes to the government, you must make these payments yourself when you file your federal income tax return. Report your yearly earnings on a Schedule SE along with your other tax return documents.
Can I work after retiring and still receive Social Security benefits?
After you reach your full retirement age, you can collect retirement benefits and still continue to work without any reduction in your benefits. Delayed retirement credit is generally given for retirement after the full retirement age. But no credit is given after age 70. To receive full credit, you must be insured at your full retirement age. You will receive increased benefits for each year you delay retirement.
When should I retire so that I can collect maximum benefits under Social Security?
This depends on you current age. Social Security currently has a graduated retirement age between ages 65 and 67. For anyone born before 1938, full retirement age is 65. Between 1938 and 1960, the age is graduated upwards every 2 months until those born in 1960 or later will reach full retirement age at 67.
You can also take early retirement benefits starting at age 62. But you will receive less money if you chose to begin these early payments. Further, receiving maximum benefits is complicated by how long you will live after you start receiving your benefits, and if you plan on working after you start to collect benefits.
TIP: These issues are highly complex-the Social Security Administration suggests exploring your options with one of their representatives at 800.772.1213. Contact your local Social Security office to discuss the best option for you.
I am divorced. Can my ex-spouse collect Social Security on my record?
In some cases, yes. He or she can collect Social Security disability benefits. You must have been married for at least 10 years. Your ex-spouse must be at least 62 years old and currently unmarried. He or she cannot be eligible for equal or higher benefits on his or her own Social Security record.
SIDEBAR: The amount of benefits paid to your ex-spouse has no effect on the amount of your benefits or your current spouse's benefits.
What are "survivor's benefits"?
If you are a fully insured worker, meaning you have met the Social Security eligibility requirements, your Social Security benefits can be paid to a surviving family member at your death. Eligible family members include a surviving spouse over age 60 and an ex-spouse over age 60 if you were married more than 10 years.
What are "disability benefits"?
Social Security pays disability benefits to insured applicants-meaning the applicant meets Social Security eligibility requirements-who also meet the Administration's definition of "disabled." "Disability" under Social Security is based on a person's inability to work because of a medical condition. You are considered disabled if:
- you cannot do work that you did before and the Administration decides that you cannot adjust to other work because of a medical condition;
- your disability lasts or is expected to last for at least 1 year or result in death.
What if the Social Security Administration reduces or terminates my benefits?
The Social Security Administration can reduce or terminate your benefits based on a finding that your income exceeds a threshold limit, you are no longer fully disabled or a partial disability no longer exists. You have 60 days to appeal the Social Security Administration's decision, starting the day after you receive notice of the change in your status. If you want to receive benefits during the appeals process, you must ask for an appeal within 10 days of receiving the reduction or termination letter.
TIP: Your appeal must be in writing. The Social Security Administration has forms you can use.
What is a "representative payee"?
A representative payee is someone else who has the right to collect your Social Security payments. You may elect to do this when you are no longer able to manage your funds by yourself. These are generally family members or nursing homes responsible for your day-to-day care. You must notify the Social Security Administration that you are incapable of handling your funds. The Social Security Administration can appoint a representative payee, or you can indicate who you would like to serve.
How can I get a copy of my Social Security Statement?
Each year, the Social Security Administration sends each worker an annual statement of the estimated future Social Security benefits based on their reported income. If you do not receive this statement, contact your local Social Security office. You can also request a statement online at www.ssa.gov.
I received a "Notice of Overpayment" from the Social Security Administration. What is it and what should I do?
You may get a "Notice of Overpayment" if the Social Security Administration sends you more money than you are entitled to. The notice will usually tell you that you were overpaid and the overpayment amount will be deducted from your next payment. You have the right to appeal this notice, but must do so within 30 days of receiving the notice. You can ask the Social Security Administration to reconsider the overpayment or to waive its rights to the overpayment.
How do I apply for benefits?
The Social Security Administration suggests that you apply for your benefits at least 3 months before you want to start receiving them.
TIP: You can apply for benefits online at www.ssa.gov, or you can call 800.772.1213. You will need to supply your Social Security number, your birth certificate, your previous year's tax return and W-2 forms, and your bank account information so your benefits can be deposited directly into your bank account.
Can my dependents receive my Social Security benefits?
Yes. Retirement or disability payments can be made to spouses over age 62 and spouses under age 62 if the spouse is caring for a minor or disabled child.
Do I have to pay tax on my Social Security income?
You may have to pay federal income tax on up to one-half of your Social Security benefits for any year in which your adjusted gross income plus nontaxable interest income and one-half of your Social Security benefits exceed a base amount.
TIP: Contact your local Social Security office if you have additional income to find out more.
What is Social Security Disability Insurance?
This pays benefits to you and certain members of your family if you are "insured," meaning that you worked long enough and paid Social Security taxes. You must meet the Social Security Administration's strict definition of disabled. If you do, you will receive a monthly payment. The program does not pay for partial or temporary disability. Call or visit your local Social Security office to find out if you qualify for this program.
What is Supplemental Security Income?
Supplemental Security Income pays benefits to the elderly and disabled based on financial need. This program does not require that you have worked and paid into the Social Security system. The Social Security Administration will count some assets and not others towards their determination of your need.
EXAMPLE: Your home and one automobile do not count.
SIDEBAR: Some states supplement the benefit amount with a state program.