Social Security

Social Security in the U.S. does not refer to a general right of people to feel secure in their lives. It is used specifically to mean the Social Security Insurance that people pay into while they work and receive payments from when they retire. Social Security Tax applies to those who work for employers and those who are self-employed.

Social Security payments are made to those with a disability, those who are over a certain age, and surviving spouses and children of workers who die.

U.S. workers do not have a choice as to whether or not they wish to participate in Social Security — it is a requirement for those who are working for pay. There is however a “Cap” on the wages that are taxed for Social Security. Currently (2016) earnings up to $118,500 are taxed; earnings over that amount are not.

Social Security forces people to save for their retirement. Many if given the choice would not bother to save — old age seems like a long way off and money is always short. But it can also lull people into a false sense of security if they believe it's all they will need to live on when the time comes.

Update June 2019 If you are homeless and disabled, don’t think that you can’t apply to the Social Security Administration for disability benefits. You have the same rights as anyone else to do so. If you have no address you can use to receive your benefits you have several options. You can designate a trusted relative or friend as your representative payee — and this can also be a nonprofit organization or the managers of a homeless shelter or, of course, your bank account if you have one. Be sure to advise the SSA that your are homeless as part of your application

Good News October 2018 Good news for Social Security benefit recipients in 2019. Due to the upticks in interest rates and other measures of the economy, your Social Security benefits will be increasing next year. This adjustment, called COLA (Cost of Living Adjustment) will begin in January. On the not so good news front, the Social Security Administration is warning people, and seniors in particular, about an impersonation scheme that is going on right now (October 2018). Someone is making phone calls and claiming to be the Acting Inspector General. The person calling may claim to be “Gale Stone” and will say that your Social Security Number might be made reactive or totally deleted, and thy provide a phone number for you to call to take care of the matter. Of course if you call they will want all kinds of personal information. DON’T call and DON’T fall for this fake call. If you do receive such a call you should call the OIG toll free: 1-800-269-0271.

A Reminder for Parents of Disabled Children September 2018 Did you know you might be able to get income payments for children with disabilities? If the child is younger than 18 years of age and has some physical and/or mental condition that qualifies according to SSA’s definition of children’s disabilities it may be possible. Your income would also have to be considered “low.” You can get a booklet that explains in more detail on the Social Security website. But don’t stop there…. you will also want to see what the specifics are for the state you live in. Some states will supplement the SSI payment with additional funds.

Update April 2018
 What changes have occurred in 2018 for Social Security? Well the basics won’t change but there will be some significant differences you should be aware of:

You probably are aware at for those born in 1954 or before that, the full retirement age (that is, the age at which you may start receiving social security benefits) is 66. Now, for those born after 1955, the eligible age is going to gradually increase to age 67. If you were born in 1955, your full retirement age will be 66 years and 2 months; those born in 1956: 66 years and 4 months, and so on up to 1960 or later: 67 years. Not only does that mean you’ll have to wait longer for your full retirement age — and, if you choose to start taking benefits earlier, the amount you can receive will be more significantly reduced.

“Social Security Benefits” refers to payments made to those who qualify to receive them. You qualify by earning wages and accumulating Social Security “credits”. The amount of earnings needed to get one credit varies (i.e. typically goes up) from year to year; in 2016 it is $1260. You can only earn up to four credits per year. And typically you need to have at least 40 credits in order to qualify for payments - about ten years of working. The requirement is lower for disability payments or payments to survivors. The size of the payments you receive are based on the total number of credits you have earned over the years.

Ever wonder how much you get in social security payments compared to what you have paid in over your working lifetime? Apparently those with lower earners are more likely to get back more and those with higher earnings get less. According to a recent Wall Street Journal report the “turning point” for those income amounts is around $65000 for a single earner and twice that for couples. And people have been wondering more about this question since at in late October 2016 the Social Security Administration (SSA) announced that there would be a payroll tax increase starting on Jan. 1 of 2017. It will affect about 12 million higher earning workers. The wage base — that is, the amount of an individual’s earnings that is subject to the Social Security tax — will go up. The increase will be 7.3% and the base will rise to $127,000 from $118,500. It is a larger than usual increase because the base stayed flat the previous year.

Update October 2017

Good news and bad news for those who depend on Social Security for the main part of their income in their senior years: benefits are expected to go up 2% in 2018. That’s the largest monthly benefit increase since 2012! The increased checks will start going out in late December 2017 for those who are on disability and others will see their first larger check in January 2018. The Social Security Agency also increased the maximum amount of one’s earnings that are subject to the Social Security tax. And increases in Medicare costs may wipe out any increase in incomes for some. But … that’s still better than getting no increase and also having to pay more Medicare premiums…

Update June 2017 Did you know that if your spouse gets a lot more than you do in Social Security benefits, you can apply for “spousal benefits” and get up to half of what the higher earning spouse receives. So if your spouse gets $2000 per month and you get just $500 per month, by claiming spousal benefits instead you could get up to $1000 per month. Both of you have to have been at full retirement age when benefits started. You can’t get these higher benefits retroactively, but you can call Social Security directly and simply asked to be switched from your regular benefits to spousal benefits. This will NOT reduce the amount your spouse is currently receiving.

Update February 2017 One change to Social Security in 2017 that many may not have noted is a change to full retirement age. If you were born in 1955 and so will be 62 in 2017 your full retirement age will be 66 years and 2 months rather than just 66 years. It may not sound like a lot, but it does permanently reduce your benefits over time. For instance, the Motley Fool gives an example of a worker reaching 62 in 2017 and your benefits at full retirement age would be $1500 per month. Now that worker will qualify at age 62 and 2 months and the monthly payment decreases to $1112.50 because you’re starting to take payments not just four years early but four years plus two months early. Weird but that’s the way it is…

When Can I Get Social Security Benefits and How Much Will I Get? The earliest you can start receiving benefits (other than Disability or Survivor) is 62. If you need to know what other benefits you can qualify for right now you should check out our review of benefits.gov and take their questionnaire to get a report on what you’re eligible for. If you are in serious need of some help right away please see I Need Help for more options.

With regard to benefits, anyone with enough earnings can start taking benefit payments as early as age 62. This is one reason why your Social Security Number is so important: it’s how the government keeps track of how much you have earned. Be sure to always enter it carefully when filling out an application, keep it in a safe place rather than carrying it with you, don’t ever let someone else use it - and don’t use anyone else’s.

If you choose to start taking payments at age 62 the amount of your benefits will be reduced for each month earlier than your “full retirement age.” That age depends on when you were born, not on when you actually retire. The lowest full retirement age is for those born between 1943 and 1954; that age is 66. It goes up by two months for each year between 1955 and 1959, then is 67 for those born in 1960 or later. You can also choose to wait until some time later than your full retirement age to start collecting benefits. One benefit of waiting is that the later you start taking benefits, the bigger your monthly payment will be. However, remember that if you die no one “inherits” your payments — in some cases they may qualify for survivor benefit payments but those will be less than you were receiving, and there will be a limit on how much a family can receive each month.

Some people take the time to estimate the total payments they would receive based on different start dates, different payment amounts and different guesses as to how long they will live. (You can use tools provided on the Social Security Administration website to estimate how much more you would receive monthly based on different scenarios). Those we have spoken to generally find it’s a good bet to just start taking the benefits at your full retirement age (or even earlier if you won’t be earning money while receiving the benefits).

What If I Work While I’m Getting Social Security Payments? It’s perfectly ok for you to work while you are getting benefits. However if you start receiving payments before your full retirement age your payments will be reduced by $1 for every $2 you earn. In the year that you will reach full retirement age your benefits are reduced $1 for every $3 you earn until you reach full retirement age. After that your payments are not reduced at all if you also earn money.

What Are Disability Benefits? 
People who are unable to work because of a mental or physical condition that is expected to be long term may be able to qualify for Social Security disability benefits. The requirements are strict and can be confusing so if you think you may be eligible you should talk directly to someone in a Social Security Administration office. You can also take a look at the online application at www.socialsecurity.gov. Some people may also qualify for Supplemental Security Income (SSI) if they have a disability and also are low income and have very few resources. Again, talk to someone in the SSA office, they are there to help you. Currently the average monthly SSI payment is about $733 for an individual or $1100 for a couple.

Are Social Security Payments Tax-Free? Your Social Security income will be taxed based on your total income and how you are filing. If you file as an individual your payments will be taxed if your income is over $25,000. For joint returns taxes hit if your total income is over $32,000.

Family Benefits
 There are many situations where your widow and/or children may be able to get payments if you die. Ex-spouses may even be eligible as well. If you have specific questions about how these things are determined, again we recommend that you speak to someone who works in the department.

This may all sound great — or it may be totally confusing. That’s understandable — there are a lot of variables and choices to be made. Fortunately the Social Security Administration - the folks who manage all of this - have put together some very useful tools to help you out. For example, you can use their Retirement Planner to help you make decisions whether you’re ready to retire now or sometime in the future. You can apply online for your benefits whether for your own retirement or for disability or survivor benefits. And if you want to play with the numbers to determine when you should start taking payments you can get benefit estimates at various ages and earning levels. Just go to the Social Security Administration website. Look for planners or estimators or just click on the topic that matches what you are looking for.

There is a wealth of information available at ssa.gov. The opening page makes it easy (if you scroll down a bit) to choose the topic you are interested in to get more information. For example, “Benefits Planner” and “Calculators” are listed at the very top of the section called “Items of Interest”. If you get confused or are uncertain we have found their telephone service to be actually very helpful, with friendly human beings available to talk with you. You can call them at 1-800-772-1213 or at their TTY number 1-800-325-0778.

As you do your retirement planning keep in mind that Social Security will probably not be all you need in order to live comfortably in your retirement. It should just be part of your total retirement planning. Some current averages (as of 2016) may help you set your expectations: The average retired worker receives about $1340 monthly in benefits; retired couples get about $2210; a widow or widower receives about $1285, or if they are young and have two children the amount is about $2647; a disabled worker gets about $1166 or $1984 if he or she has a spouse and a child.